System dynamics modelling of machine downtime for small to medium highway contractors in Thailand

Thanapun Prasertrungruang and B.H.W. Hadikusumo

IntroductionConstruction companies, especially highway contractors, rely heavily on mechanisation. Interruption of this mechanical supply not only incurs the direct costs of labour, replacement parts and consumables, but also the indirect costs of workforce, equipment downtime, contract delay, possible loss of client goodwill and ultimately, loss of profit (Edwards et al., 1998). Construction equipment is thus an important key factor for improving the contractor’s ability to perform their work more effectively and efficiently (Day and Benjamin, 1991). There are a number of factors affecting the productivity of construction equipment. Some factors are uncomplicated to identify and quantify, whereas others are problematic and difficult to predict. Downtime resulting from machine breakdown during operations is one of the most unanticipated factors that have a substantial impact on equipment productivity and organisational performance as a whole (Schaufelberger, 1999). Indeed, machine downtime is the most significant problem in equipment management faced by highway contractors (Prasertrungruang and Hadikusumo, 2007). Previous studies have addressed the issue regarding downtime in many aspects, for instance, downtime classification (Pathmanathan, 1980; Vorster and De La Garza, 1990), quantification (Vorster and De La Garza, 1990; Nepal, 2001), and prediction (Edwards et al., 2002), but little effort has been made to investigate the causes and consequences of downtime, particularly from a dynamic perspective (Nepal and Park, 2004). In fact, practices and policies for equipment management have some of the most dramatic effects on downtime (Elazouni and Basha, 1996). Variation in practices regarding the flows of machine-related factors (e.g. capital equipment, operators, mechanics, spare parts, and information) over time is thus a root cause of the dynamics of downtime (Nepal and Park, 2004). However, attempts to investigate the underlying interdependencies between these less tangible factors (e.g. equipment management practices) and downtime, which control the dynamic mechanisms of the system, have been rare (Edwards et al., 2002). Complex dynamic behaviour and the interaction between equipment management practices and downtime can be characterised by several key aspects, including cause-effect relationships, multiple feedback loops, nonlinear relationships, time-delayed responses, and involving both quantitative and qualitative data (Sterman, 2000). Managing construction equipment successfully with the aims of minimising downtime and maximising profit is therefore challenging (Edwards et al., 1998). This research is therefore intended to highlight the key dynamic features of downtime and its influential factors, using them as a framework in developing system dynamics (SD) simulation. Further, this simulation model generates several policy recommendations. The scope of this study focuses mainly on the equipment management practices and downtime of small to medium contractors in Thailand’s construction industry. Since machine weight is one of the major indicators of downtime and maintenance cost (Edwards et al., 2000a, b, 2002), only five types of large heavy equipment for highway construction were selected in this study (seeTable I). Note that weight interval for each equipment type is also assigned in order to allow for machine generalisation.

Equipment management practices and downtime in construction
The construction industry is exposed to a variety of risks. Equipment failure is one of the major risks frequently occurring during construction that consequently causes expensive downtime. However, downtime can be affected by other factors as well. Those factors are project-related factors, equipment-related factors, crew-level factors, site-related factors, and force majeure (Nepal and Park, 2004). As the consequential impact of downtime is huge, contractors need to build their competency in managing construction equipment throughout a machine’s lifecycle: acquisition, operations, maintenance, and disposal. Key elements of equipment management practices that contractors need to consider include, for instance, procurement decision approach (equipment acquisition stage), safety and training programs (equipment operational stage), scheduling preventive maintenance inspection and standby repair-maintenance facilities (equipment maintenance stage), and equipment economic life and replacement decisions (equipment disposal stage). In order to minimise the effects of downtime, the contractors have several alternative actions to consider, such as seeking substitute equipment, waiting until the repair is finished, accelerating work pace, modifying the work schedule, and transferring crews to other operations (Nepal and Park, 2004). The consequences of downtime can be categorised into two groups: downtime cost and downtime duration. Downtime duration can be classified into two types: scheduled and unscheduled downtime. Scheduled downtime is a time period when equipment is not available due to a routine task (e.g. periodic maintenance), whereas unscheduled downtime is a machine failure period caused by breakdown or equipment malfunction (Elazouni and Basha, 1996). Downtime cost consists of two elements: tangible and intangible costs. Tangible costs (e.g. costs of labour, material, and other resources needed to repair equipment) are easy to determine. However, intangible costs (e.g. production losses from labour and associated machines, extended overhead costs, liquidated damages, late completion charges) are rather difficult to quantify (Pathmanathan, 1980).

Data analysis
Data collected from each company (case) were examined using within-case and cross-case analysis approaches (Eisenhardt, 1989). Within-case analysis approach was performed first to allow the unique patterns of each case to emerge, and cross-case analysis approach was then used to uncover the similarities and differences among the cases. By employing cross-case analysis approach, several generic feedback loop structures, representing overall dynamic behaviours of cause-effect relationships with time-delayed effects of the system across all company cases, could be launched. In this study, the SD approach was adopted. SD is a way of analysing the behaviour of complex socioeconomic systems to show how organisation and policy influence behaviour over time (Sterman, 2000). Note that opinions and comments from the selected experts had been incorporated in every step of the study in order to validate the outputs (e.g. generic feedback structures, generic SD model, and policy recommendations). That is, the outputs could not be accepted as valid without an agreement from the selected experts. Based on the generic feedback structures constructed, the generic SD simulation model was then created. This step includes the identification of stock and flow diagrams. Stock represents accumulated quantities, whereas flow controls the changing rate of quantity going into or out of stock (Park, 2005). Powersimw software was utilised to construct the model.

To check the credibility of the generic SD model, data collected from each of the five company cases were input into the model in order to generate five different applied SD models. Each of the applied SD models represents the equipment management system of one particular contractor case. The generic SD model could not be accepted as valid unless all of the applied SD models were capable of generating time-series outputs of selected variables similar to those plotted using historical data (reference mode) from each of the company databases. Once the generic SD modelling process had been completed, it was validated (e.g. using sensitivity analysis) until the model was satisfactory. Last, policy analysis was used to recommend improvements to the equipment management system.

Generic feedback structuresFeedback structures are essential in SD as they are not only the foundation on which quantitative SD model is built, but also a valuable device in describing and understanding the dynamics of the system (Coyle, 1996). In this section, five generic feedback structures developed based on the interview data from all five small to medium contractor cases are presented as follows.

1. Machine acquisition feedback structure
2. Machine operational feedback structure
3. Machine maintenance feedback structure
4. Machine disposal feedback structure
5. Machine downtime feedback structure

Generic SD model structure
The aim of this section is to illustrate key elements of the generic SD model. The model can be divided into five subsystems. Each of the subsystems comprises various sectors, which were constructed as referenced to their corresponding feedback loops. As mentioned earlier, this study focuses on only five types of heavy equipment. Each type of equipment was modelled separately in the simulation and then connected together in order to capture its interdependent behaviour, which in fact induces the dynamics of downtime. The conceptual basis of the model structure was preliminarily derived from literature: infrastructure project management model (Nguyen and Ogunlana, 2005), design-build project management model (Chritamara et al., 2002), manufacturing organisational model (Keating et al., 1999), and downtime in equipment management (Nepal, 2001). Model descriptions for each of the subsystems are now presented.

Resources subsystem
The resources subsystem is made up of three sectors: equipment, operators, and mechanics. Operators and mechanics represent workforces that are categorised into two types: skilled and unskilled workers. The number of operators sought is dependent on total equipment invested, whereas the number of mechanics sought is controlled by total repair work orders and machine budget status. The equipment sector (e.g. backhoe) comprises three major stocks: “invested backhoes”, “invested backhoes on site”, and “invested backhoes under repair”. In the simulation, “invested backhoes” represent total backhoes currently owned by the contractor. Investment for additional backhoes is made if the number of backhoes sought is greater than total invested backhoes the contractor currently has. Backhoes can flow out of the company either to the job site or through disposal. Once breakdown occurs during operations, failed backhoes then flow into “invested backhoes under repair” and stay there until the repair is completed.

Quality subsystemQuality in equipment management was modelled and disaggregated into various sectors. The maintenance quality sector is modelled as the ratio between maintenance cost and repair cost, whereas crew’s skill is defined as the ratio between the number of skilled workers and total workers.

Several sectors were modelled as an arbitrary scale of 0 per cent to 100 per cent instead of a formula. These sectors include equipment quality upon acquisition, spare parts quality, experience, supervision, and management commitment in proactive maintenance.

For the preventive maintenance effort sector, it is assumed that working hours of mechanics are divided into two parts: repair hours and preventive maintenance hours. This means that, if the mechanics spend much time on repair, the effort devoted to preventive maintenance is diluted.

Lastly, the machine defect sector presents an accumulation of equipment (e.g. backhoe) defects during the simulation. Level of backhoe defects is used as an indicator for breakdown events. Defects continually build up as the equipment is utilised. Further, other factors (i.e. equipment quality upon acquisition, operator’s skill, collateral damage, and spare parts quality) also affect machine defect generation. In the simulation, breakdown occurs once defects reach 100 per cent. However, defects can be partly eliminated by performing two tasks: repair and preventive maintenance.

Performance subsystem
In the performance subsystem, a number of factors influence machine productivity, such as operator schedule pressure, fatigue, supervision, experience, machine defects, and machine reliability. Most of the effects of these factors on productivity are modelled on a qualitative arbitrary scale of 0 per cent to 100 per cent. For the machine availability sector, the formula of availability was given as the difference between total invested backhoes and invested backhoes under repair, divided by total invested backhoes. Alternately, for the machine reliability sector, the formula of reliability was defined as the discrepancy between invested backhoes on site and invested backhoes under repair, divided by total invested backhoes.

Machine efficiency is the last sector in this subsystem. Efficiency was modelled in this simulation to have an inverse relationship with machine defects. The more the machine defects, the less the machine efficiency will be.

Work pressure subsystem
This subsystem includes four sectors, namely, downtime cost pressure, operator schedule pressure, mechanics’ schedule pressure, and company workload. In the simulation, downtime cost pressure was defined as a percentage of total equipment cost. The higher the ratio between downtime cost and total equipment cost, the greater the downtime cost pressure. For the operator and mechanics’ schedule pressure sectors, the formulas are similar. Schedule pressure was defined in this study as the difference between workers (i.e. operators and mechanics) sought and the current number of workers, divided by total workers.

In the equipment workload sector of equipment (e.g. backhoe), workload is controlled by work creation rate and work completion rate. Work creation rate of backhoe is proportional to the difference between desired work scope capacity and current workload of backhoe. Alternately, work completion rate was defined as a multiplication of invested backhoes on site and expected backhoe productivity.

Financial subsystem
This subsystem comprises four sectors: equipment ownership cost, equipment operating cost, downtime cost, and machine budget status.

Equipment ownership cost is a fixed cost that is incurred each year whether the equipment is operated or not. This cost is made up of two elements: depreciation, and insurance and tax. Alternately, equipment operating cost is the cost incurred only when equipment is operated. Thus, operating costs vary with the amount of equipment used and job operating conditions. The major elements of operating cost include operator and labour wages, repair and maintenance costs, and fuel cost.

The downtime cost sector is a combination of equipment substitution cost, operator and labour idle cost, equipment idle cost, dependent equipment idle cost, dependent operator and labour idle cost, and repair cost of the failed machine.

Finally, for machine budget status, this sector is modelled as a stock. Machine budget status is increased if work progress is generated by equipment. Conversely, machine budget status is decreased as a result of higher downtime cost pressure as well as a greater ratio between machine investment and disposal rate.

Model testing for validation
After the data from each of the five contractor cases had been input into the generic SD model, five applied SD models were then adopted. Each of the applied SD models was subjected to a variety of validation tests to establish confidence in the soundness and usefulness of the generic SD model (Forrester and Senge, 1980). The study adopts model testing methodology from Sterman (2000), which has been categorised into two groups as follows.

1. Structural validation test
The model has been checked for the adequacy and appropriateness of its boundary throughout the modelling process by using data from many sources such as literature, interviews with experts (e.g. equipment managers), archival materials (e.g. machine investment and disposal records), and company databases (e.g. repair and maintenance costs). To clearly depict the boundary, model boundary chart and subsystem diagrams were also employed. Additionally, the feedback structures and the generic SD model derived during data collection were reassessed repeatedly with experts in the field to ensure they are consistent with reality.

2. Behaviour validation test
In order to assess the model’s ability to reproduce the behaviour of the real system, outputs from the simulation were compared with historical data obtained from the contractor. The comparisons of model base run and historical data (reference mode) of selected variables over time for a selected contractor case. It is obvious that behaviour of the base run and historical data is relatively similar. The model is thus successful in reproducing real data. In addition, a certain period of delay incident occurred after the policy intervention had also been found before the emergence of equipment performance improvement. Such delay incident was observed both in the model behaviour as well as in the real system. This confirms that the simulation model is behaviourally valid.

Policy formulation and analysis
Up to this point, the model has already been proven as structurally and behaviourally valid. This section thus aims at analysing and identifying a set of effective policies capable of improving equipment performance. Four key performance measures for comparing the policy behaviour were selected: total downtime duration, machine budget status, operator schedule pressure, and machine reliability. The policies were derived not only by reviewing literature such as (Laugen et al., 2005), but also from interviews with professionals. During the simulation, the following policies were experimented individually for a time frame of ten years (i.e. year 2005-2015). The policies can be categorised into four groups as shown in Table II.

Machine acquisition policies
Among the three equipment acquisition policies explored (Figure 1), machine quality upon acquisition (policy 3) is the best in term of producing lowest downtime duration and operator schedule pressure, as well as generating highest machine budget status and reliability. Machine fleet expansion (policy 2), in contrast, is the worst as it incurs highest downtime duration as well as lowest machine budget status and reliability. It is noted that policy 2 seems to generate lowest operator schedule pressure at the beginning, as more machines have been supplied. However, such positive behaviour of policy 2 lasts only for the first five years. In the long run, policy 2, in fact, tends to cause highest operator schedule pressure when works are interrupted due to more equipment failures.

Machine operational policies
For machine operational policies (Figure 2), in term of downtime reduction, multi-skilled training (policy 4) is the best, whereas work incentive scheme (policy 6) is the worst. However, by considering other measures, quality improvement team (policy 5) seems to be superior to others. This implies that policy 4 is effective only for the short term. In the long run, though, policy 5 is the most sustainable strategy for improving equipment performance. This could be due to the reason that, once a quality improvement team is established (policy 5), equipment defects are then continuously eliminated with the efforts of all parties involved. For policy 4, as operators are allowed to use multiple machines, downtime is then apparently reduced but defects rapidly accumulate, causing inferior performance in the long term.

Machine maintenance policies
As shown in Figure 3, it is obvious that shop crew capacity expansion (policy 7) is the worst, based on the four performance measures. Instead of expanding shop crew capacity, the contractor can use repair outsourcing strategy (policy 10), which is much more powerful, especially in minimising downtime duration and maximising machine reliability. Supplier strategy (policy 8) and autonomous maintenance (policy 9) can also be considered as effective policies since they produce a significant improvement superior to the base run, especially in minimising operator schedule pressure and maximising machine budget status. Although allowing equipment operators to perform simple maintenance tasks (policy 9) seems to increase their schedule pressure at first glance, the benefit of this policy, which is better machine condition, far outweighs this pitfall. With better equipment condition, operators can work productively without breakdown interruption, thus causing less schedule pressure to operators.

Machine disposal policiesFigure 4 shows that all three equipment disposal policies have superior performance to the base run. Dismantling-for-parts disposal (policy 13) seems to be the best, according to the four performance measures; while disposing of machines based on resale value (policy 11) produces the least benefits. Trade-in-for-new disposal (policy 12) is also a best candidate since it generates behaviours relatively close to those of policy 13. By dismantling some of the disposed machines for parts (policy 13), the contractor can save a significant amount of spare parts cost as well as shortening downtime duration since spare parts lead time becomes minimal.

Conclusions
This research is of value not only in facilitating more understanding regarding the dynamics of downtime for small to medium highway contractors, but also in assisting the contractors towards achieving reduced downtime and improved equipment performance by means of various policy recommendations using the SD approach.


To be successful in minimising downtime, equipment management practices must be viewed as an integration of multiple dynamic processes, which are all interrelated with downtime. In fact, downtime suffers heavily from the reinforcing cycles of operator and mechanics’ schedule pressure creep, as well as schedule disruption and downtime cost pressure growth. Although the balancing cycles of operator and mechanics’ skill improvement can alleviate downtime problem, their expected benefits always accrue after a delay, thus retarding the effect of improvement, or sometimes worsening the scenarios if contractors decide to discontinue training. Once the reinforcing cycles of downtime cost pressure and operator schedule pressure creep have been activated, proactive maintenance efforts are gradually diluted due to increasing downtime.
However, an increase in downtime can be controlled by adjusting the maintenance budget required for mechanics, facilities, parts, etc.

Having identified the dynamics of equipment management practices and downtime through five key feedback structures, a generic SD model was then constructed and successfully validated with five contractor cases. Results of the policy analysis reveal several promising policies, including machine quality upon acquisition (acquisition stage), quality improvement team (operational stage), repair outsourcing (maintenance stage), and dismantling for parts (disposal stage).

Future research could be directed towards exploring the dynamics of downtime associated with other factors in different perspective, rather than only with equipment management practices. Influences and impacts of such differences on the organisational performance are of prime interest. Further study could also focus on studying the dynamics of downtime in other types of contracting companies where equipment is a major resource used in production.

This research paper was published in the journal of “Engineering, Construction and Architectural Management, Vol. 15 No. 6, 2008, pp. 540-561”. Full paper is available upon request.

AbstractPurpose – Downtime resulting from equipment failure is a major problem consistently faced in highway construction. Since managing construction equipment is tightly connected to various activities and parties inside as well as outside of the firm, failure to account for this fact invariably causes downtime to be even more severe. Variation in equipment management practices is thus, indeed, a root cause of the dynamics of machine downtime. This study is intended to address key dynamic features of heavy equipment management practices and downtime in small to medium highway contracting firms and propose policies for equipment performance improvement.
Design/methodology/approach – Face-to-face interviews with equipment managers from five different small to medium highway construction companies in Thailand were conducted. Data were analysed using a system dynamics (SD) simulation approach.
Findings – To overcome downtime problems, contractors need to understand the dynamics of downtime as well as its influential factors, and thus manage their equipment as a dynamic process rather than one that is static. Based on the simulation, various policies are proposed to improve the performance of heavy equipment for small to medium highway contractors.
Originality/value – The research is of value in facilitating better understanding on the dynamics of equipment management practices and downtime as well as their interdependency.
Keywords Main roads, Production equipment, System analysis, Dynamics, Construction industry, Thailand
Paper type Research paper

Factors Influencing The Financial Crisis That Affect Small & Medium-Sized Construction Enterprises In Thailand

Construction plays a vital role in economic growth and development. It is also important in terms of satisfying basic physical and social needs for a greater standard of living. ILO (1987) stated that construction is one of the few industries that is of common importance in all countries and is recognized as a great contributor to the national economies of all countries. Construction stimulates a sizeable amount of economic growth because the development of the construction industry supports other considerable industries such as manufacturing and real estate.

The construction industry, through the products that it creates, its size, and its ability to create employment, is likely to influence an economy’s gross domestic product (GDP) more than any other service industry (Love et al., 2004). In Thailand, the construction industry is a major component and greatly influences the economic growth. It is interesting to note that even though being an enormous industry, construction relies much on small and medium-sized construction enterprises or “construction SMEs”. Construction SMEs are not only the grass-roots of Thailand’s construction industry; they also play a significant role to drive the construction business which has the potential to develop the country. Office of SMEs promotion in Thailand (2001) promoted that small and medium-sized enterprises (SMEs) have been accepted as significant players and are the majority of business enterprises and comprise an important component for developing the economy and society of all nations. The information from National Statistic Office of Thailand (NSO, 2004), using the number of employees as the measure of size, reports that SMEs represent 98 percent of construction enterprises. In addition, construction SMEs have the financial volume approximately three times that of large construction enterprises. These distinguish how SMEs are important for construction but most construction firms are classified as SMEs.

Ms. Chanagarn Watanantachai made a study which aimed to investigate factors influencing the financial crisis that is affecting construction SMEs in Thailand so that the effective recommendations for financial crisis management could be proposed for minimize and prevent them from getting into a crisis. To achieve her objective, her sub-objectives were identified as follows: (1) to identify the key factors that lead to financial crisis and classify the importance level of each factor; (2) to explore and gain in-depth understanding how key factors influencing the financial crisis base on the practices of construction SMEs; and (3) to propose recommendations for financial crisis management that are appropriate for construction SMEs in handling with key factors influencing the financial crisis.

Results

In achieving the first objective, the analysis framework consists of 6 analysis processes. The first process is to identify the definition of factors influencing the financial crisis that is affecting construction SMEs in Thailand by using literature review and interview the managing directors. The researcher gets 33 factors that influence the financial crisis from interview expert compound with internal factors and external factors. The internal factors are included with the analysis of factors from Business Management, Financial and Accounting, Marketing, and Construction. The external factors are included with the analysis of factors from Financial Institute, Client, Supplier, Sub-contractor, and Environment .

The first objective was accomplished by using two statistic methods: 1) descriptive analysis (mean and ranking) for classifying the importance level of each factor and 2) hypothesis testing (T-test) for test the perception difference between construction SMEs with financial problem and construction SMEs without financial problem.

According to a descriptive analysis of the sample results, the main factors (the first top 10 ranked) influencing the financial crisis that is affecting construction SMEs in Thailand are Economic downturn, Payment delay from client, Increasing in construction costs, Politic instability, High competition, Unable to access sources of funds, Insufficient funds and limited capital, Low price bidding to get projects, Under-table expense for client, and Cash flow shortage. All top 10 factors are classified as a high importance level for influencing the financial crisis. There are 7 factors (out of top ten) from external factors which are difficult to control. The others 3 factors (out of top ten) are from internal factors. The groups of external factors and internal factors are shown below:

External factor
· From environment: Economic downturn, Politic instability and High competition
· From client: Payment delay from client and Under-table expense for client
· From supplier: Increasing in construction costs
· From financial institute: Unable to access sources of funds

Internal factor
From finance: Insufficient funds and limited capital and Cash flow shortage
From marketing: Low price bidding to get projects

In order to achieve the second objective of this study, factor analysis was used to explore and gain in-depth understanding how key factors influencing the financial crisis from the practices of construction SMEs. From factor analysis, the 33 factors influencing the financial crisis were classified into 7 groups of key factors: Adverse Effects of the Nation’s Situation, Less Profit or Making Loss, Low Cash Liquidity, Poor Credit Potential, Deficiency in Knowledge and Experience, Improper Contract Administration, , and construction project problems. The relationship and logical framework for summer of key factors that is influencing the financial crisis was illustrated in figure 1.



Figure 1. Logical Framework for Summer of Key Factors that is Influencing the Financial Crisis

Finally, the summary of interrelationship frameworks that demonstrate how key factors influencing the financial crisis are developed as illustrated in figure 2.



Figure 2. Summary of Interrelationship Framework of Key Factors that is Influencing the
Financial Crisis

Recommendations for Improvement

For achieving the final objective of this study, the last research objective is completed by proposing the recommendation for financial crisis management that are appropriate for construction SMEs. The causes, consequences, and recommendation for handling with the 10 key factors were discussed in table 1.

Her thesis abstract is copied and posted.

ABSTRACT

Construction SMEs are a backbone of the construction industry in Thailand. Unfortunately, construction SMEs have extremely high uncertainty and risk that lead them face with financial crisis and business failure easily and they can lead to failure of the Thai construction industry. Therefore, it is necessary to have a study concerned with financial crisis in order to know what factors lead construction SMEs to get into a financial crisis. This study aims to investigate key factors that influencing the financial crisis that is affecting construction SMEs in Thailand and recommend the effective method for financial crisis management.

The researcher decided to use 2 types of research design: 1) quantitative research by using survey design and 2) qualitative research by using case study. There are 3 statistic methods were used to analyze data from questionnaire surveys: 1) descriptive analysis (mean and ranking) for classifying the importance level of each factor, 2) hypothesis testing (T-test) for test the perception difference between construction SMEs with financial problem and construction SMEs without financial problem, and 3) factor analysis for reducing set of factors. For qualitative study, the case study was used to gain in-depth understanding how key factors influencing the financial crisis base on the practices of construction SMEs.

Results were found that there are 10 key factors that influencing the financial crisis: Economic downturn, Payment delay from client, Increasing in construction costs, Politic instability, High competition, Unable to access sources of funds, Insufficient funds and limited capital, Low price bidding to get projects, Under-table expense for client, and Cash flow shortage. The causes, consequences, and recommendation for handling with the 10 key factors were discussed in this study.

AIT alumnus appointed Deputy Minister in Vietnam

An alumnus of the Asian Institute of Technology (AIT), Dr. Cao Quoc Hung has been appointed as Deputy Minister, Ministry of Industry and Trade in Vietnam.

for detail information, please visit:

- http://www.ait.ac.th/news-and-events/2014/news/ait-alumnus-appointed-deputy-minister-in-vietnam/view#.UuTebvb-JYC

- http://www.vietnambreakingnews.com/2014/01/pm-appoints-new-deputy-trade-minister/#.UuHj8KU44lI

- www.moit.gov.vn/en/Pages/Leaders.aspx

Happy Tet 2014

Visit Mekong Delta January 2014

Mekong Delta visit
January 2014

At the beginning of the year 2014, MPM program representative, Dr. Hadikusumo, had a visit to two Mekong Delta provinces: Bac Lieu and Tra Vinh.

- Bac Lieu Department of Planning and Investment and Bac Lieu University; 

- Tra Vinh Management Board of Tra Vinh Economic Zone and Tra Vinh Board of Project Management of Investment and Construction. 

The very good results of those fruitful meetings have promised to bring bright near future for coming corporations between MPM/AIT and those provinces. Once MPM program can be launched at their places, it will take a part to contribute for the province sustainable development with higher quality human resource, esp. in construction project management field. We believe that as what we have being done for Can Tho, Vung Tau, Ha Noi and Ho Chi Minh city since 2007. 

Dr. Hadikusumo, MPM (left) and Mr. Pham Thanh Hien, Vice Director of Bac Lieu Department of Planning and Investment 

Dr. Hadikusumo, MPM (left) and Mr. Tran Manh Hung, Vice-Rector, Bac Lieu University

Dr. Hadikusumo, MPM (left) and Mr. Le Van Kham, Management Board of Tra Vinh Economic Zone 

Dr. Hadikusumo, MPM (left) and Mr. Vuong Hai Khoa, Director of  Tra Vinh Board of Project Management of Investment and Construction

Communication Management in Construction Project

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Development Infrastructure Program To Support For Van Don Economic Zone

The growth of project finance over the last 20 years has been driven mainly by the worldwide process of deregulation of utilities and privatization of public sector capital investment. This has taken place both in the developed world as well as developing countries. It has also been promoted by the internationalization of investment in major projects: leading project developers now run worldwide portfolios and are able to apply the lessons learned from one country to projects in another, as are their banks and financial advisers. Governments and the public sector generally also benefit from these exchanges of experience.

Private finance for public infrastructure projects is not a new concept: the English road system was renewed in the 18th and early 19th centuries using private sector funding based on toll revenues; the railway, water, gas, electricity, and telephone industries were developed around the world in the 19th century mainly with private-sector investment. During the first half of the 20th century, however, the state took over such activities in many countries, and only over the last 20 years has this process been reversing. Project finance, as an appropriate method of longterm financing for capital-intensive industries where the investment financed has a relatively predictable cash flow, has played an important part in providing the funding required for this change.

Infrastructure plays an important role in development Socioeconomic. It contributed greatly to the economic development of Vietnam and Economic zones. In recent years, infrastructure system in Vietnam has appeared more limited. This is a bad influence on the economy. This fact is determined by the following basic reasons:

• Planning and implementation of the plan lacks predictability, synchronization.
• The rapid growth of the economy leads to overloading of the system infrastructure. while capital investment is limited.
• The project was implemented by the state less effective. This is the cause of slow progress and quality of projects.

PHAM VAN THANH conducted a case study which objectives were to:

1. Investigate and identify key infrastructure for developing Van Don economic zone. Estimation general cost and soure of fund for infrastructure system.

2. Determine the overall progress of the program and Analyzing the feasibility of the program and the critical difficulties in capital investment.

3. Propose solution recommendations in field of fund and legal for performance the program from the state authority’s point of view for developing infrastructure system.

Conclusion

The case study had analyzed the development of infrastructure at the Van Don economic zone, which is defined as dynamic economic development and regional areas. The analysis shows that:

• Infrastructure development plays a decisive role in the development of economic zones in particular and economic sector in general.
• The investment in infrastructure construction needs a large and sustained fund. while the project is long cycle life, many risks, capital recovery is slow, less attractive to investors.
• At the macro level, Government will play a major role in investment and development of public infrastructure, because the investment in infrastructure development is low financial benefit but high in Socio-economic benefits and security social welfare.
• But, state funding is not enough, thereby diversifying investments fund is necessary solutions for allocation the risk of capital scarcity in the future.

Besides making uniformity of implementation planning. Analysis to develop sustainable financial resources for infrastructure development is a critical condition.

Diversify forms of capital to increase capacity to mobilize capital in the application of financial modeling is essential.

Special issue of privatization, project finance, public private partnership should be carefully considered depending on the maturity level of the economy as well as the sustained commitment of the government through the mechanism management.

Advanced methods can be successfully applied in developed countries but by no means will succeed when brought into Vietnam without appropriate adjustments, there are reasons for differences in the provisions of policies and economic conditions - social, especially when developed countries already have experience and maturity level of the market economy.

The adoption and implementation of the program should have a general policy relating to the all political system in which government plays a key role in forming the mechanism.

Recommendations

1. For Improving Developing Infrastructure Program

Within the scope of research at the Van Don economic zone, the author proposes three other group solutions in policy mechanisms to ensure the viability of the programs. The solution set to ensure the following objectives:

1. Source of State Capital Financial Risk

2. Government Support Public Infrastructure investors

3. Government Support Business investors

(Source of State Capital and Financial Risk)

• Government need approves the plan capital allocated for investment in infrastructure of Van Don economic zone in a 5-year cycle. This program needs to be passed by National Assembly.
• Government should allow Quang Ninh province actively planning and using land  fund along the highway to create capital from land use fees for development infrastructure.
• Allows the Quang Ninh province keep and use tax revenues in Van Don EZ to invest in infrastructure construction.

This policy will ensure the resources of the state capital and overcome the risks of capital investment

2. Government Support Public Infrastructure investors

• Complete planning and publicizing a list of infrastructure projects, which required investment.
• Government should issued legal and Regulatory Framework of PPP, PF, Concession model. To ensure the objectives of attracting private sector capital in the country and foreign investment in developing infrastructure to provide public services.
• Governments should publicly the commitment when establish forms of cooperation in Public-Private Partnership or Private public infrastructure project.
• Create all favorable conditions and methods to ensure the recoverability capital and interest of enterprise or SPV company.

3. Government Support Business investors

Development of infrastructure for economic and social development. Economic and social development, business development is the key to making business  in public infrastructure success. Thus promoting business investment has an important role and as a result but also the cause of infrastructure investment.

• Special tax incentives for investment projects in the VDEZ, profit repatriation and reinvestment incentives.
• Special land tax and leasing rates.
• Simplified and fast approval process for key development initiatives.
• Special incentives and simplified approval process for foreign skilled workers.
• Land allocation complete with infrastructural facilities provided to expedite development.
• A more liberal policy on housing ownership and lease arrangements for Vietnamese, Overseas Vietnamese residents, Permanent Residents and Foreign Investors.
• A Preferential policy to regulate sources of revenue and increase reinvestment capital.
• To establish special development funds to promote development initiatives in Van Don.

Abstract

Vietnam is developing country having population of about 90 millions. From 90s year of 20th century, After 20 years of renovation, Vietnam has achieved important milestone in economic development, politics, society as well as foreign affairs such as remaining sustainable and high development rate (average 10% per year), stable politics, attractive and potential market to foreign investors. Nowadays, Vietnam has become member of UN, WTO and many international organizations and forums, especially playing important role in ASEAN. Vietnam has never have great opportunities and challenges to develop country like now.      

Vietnam also located in trading hub area and economical corridors of region. In order to utilize such advantages with consideration to importance of economical integration to provide equal development in country wide, Vietnam has established 15 costal economical zones in decision 1353/QD-TTg dated 23 September 2008. It will be cores and driving forces for economic development of Vietnam.

However, one of basic and key matter obstructing the development of Vietnam like other economies also, is the lack of financial capital to improve the shorted infrastructures Providing proper policies and directions to mobilize capital sources investing in infrastructure development in economic zones is the key of Vietnamese economic development policy to promote the effects of such economic zones.

This research focus study on Van Don economic zone of Quang Ninh province, which is one of costal economic zone established in year 2007 according to decision 120/QD-TTg dated 26 July 2007, and having administrative and natural area of 2171km2 and 553km2 respectively. It is northern costal economic zone having many potentials regarding to tourist, luxury recreational, industry and high-tech industry, and free trade. Study of mechanism, funding program of infrastructure development support for this economic zone is the objective of this research.

Improvement of Organizational Structure for Power Plant Project Management of PetroVietnam

Electric energy is crucial for the development of Vietnam. From 2006-2010, the actual consumption of electric energy is the same with the actual generated net electric energy of about 13.7% per year to gain 85.4 billion KWh in 2010 only. There are many different power sources such as thermal power, hydropower, nuclear power etc. But in Vietnam, country's electricity is mainly produced from thermal power and hydro-power. However, in Vietnam's power system nowadays, the rate and capacity of hydro-power is being decreased if compared to the capacity and other electrical power sources.

The PetroVietnam (PVN) is implementing the accelerated development program. As a leading economic Group in Vietnamese energy sector including search, exploration and exploitation of oil and gas, power generation, PVN is assigned as the big investor of many important projects, including projects on thermal power plants. PVN is also one of the leading biggest Vietnamese State-Owned companies with the aim of looking for investment partners who are reliable and have enough financial capacity and modern technology to develop and build the power plants quickly in order to meet the electricity demand growth in Vietnam.

With this big task, PetroVietnam now is in “hot development” status. PVN has invested & built the first power plant since 2005 with only one Management Board (MB). Now, PVN is managing five thermal power plant projects at the same time. Besides, the objective of MBs is usually changed very fast, but organization structure for all MBs is still same with the first MB in the beginning. Therefore, PVN’s management for power projects still has some outstanding issues which are the weakness in organizational structure for project management. LE ANH THONG made a case study which objectives were to:

1. Deeply understand the existing organizational structure of PVN power plant project to analyze the strength and weakness, advantages & disadvantages of the existing system

2. propose recommendation for improvement

Conclusion

The objectives of Petrovietnam Power Plant Projects (PVN’s PPP) are usually changed very fast, but PVN still has kept the beginning type of organizational structure which is “Functional Structure” from 2004 up to now. Although this structure have some minor advantages, this structure is not suitable with the growth of PVN’s PPP which has caused some weakness and disadvantages in PVN’s PPP management so far. With four individual Management Boards, they have not achieved perfect result, and in case there are complicated tasks such as different features, sizes, location and many changes which are usually very fast and extreme in PVN power plant projects, it is very difficult to control the scope, contingency funds, and overall project value. It is also very difficult to monitor or audit the project’s progress, stakeholder’s commitment, results achieved and the leading indicators of failure, and so on.

Recommendation

Therefore, with the study and analyses of this Case Study Report, the Proposed Improvement is given in which the essential issue of this Proposed Improvement is the recommendation to apply the Matrix Structure for One General Management Board instead of the Functional Structure for Four existing Individual PVN’s project management organizational board. Consequently, the advantages of the Proposed PVN’s project management organization will be almost same the advantages from the Matrix Structure.

The most important advantages of the Proposed Improvement are efficient use  of  resources of the whole Proposed General Management Board where specialized  individuals can be shared and transferred from one it’s Branch to other Branches or among all PVN’s projects. Therefore, the project management cost is minimized; the total quantity management staff shall be decreased, but the professional grade is easily increased, etc. These are the most useful and most efficient in this proposal.

With the detailed analysis and proposal, the strength and advantages of the proposed improvement are very clear and prevailed to compare with its disadvantages. Besides, there has the proposed solution to solve for these disadvantages. Therefore, it should be considered as preliminary study to apply in the PVN’s thermal power project management with the additional study needed.

However, the Proposed Improvement will not be enough to improve everything for PVN’s project management. It is necessary with best effort to apply some more other solution in order to gain actually significant improvement and overcome other outstanding weakness of PVN’s project management.

Abstract

 Electric Power is an essential energy for people’s daily life and one of the major factors in labor productivity growth. It helps to develop the economy of the countries in the world, especially for the developing countries like Vietnam. Consequently, it’s very important to know how to manage power plant projects effectively and successfully. 

PetroVietnam (PVN) who is the biggest Economic Group of Vietnamese State-Owned Groups has been assigned by Government to invest & build some power plants. So it is necessary for PVN to improve their power plant project management. With the scope of my report, I will mention about the improvement for organizational structure of PVN’s thermal power plant project management and my Management Board.

The Objecctive of my Report is the Proposal to improve Organizational Structure of PVN’s PPP to manage PetroVietnam Power Plant Projects (PVN’s PPP), and solve their weakness/disadvantages & gain better effectiveness and success

The reason to find the above Objective are the objectives of PVN’s PPP are usually changed very fast, but PVN still has kept the beginning type of organizational structure from 2004 up to now, and some weakness/disadvantages were found in PVN’s PPP management so far.

Therefore, the case chosen for my report which is the organizational structure of PVN’s PPP.

By the analyses based on theory of organizational structure for project management colland my experience during a long time work in PVN’s PPP, my recommendation of the Proposal in my Report is the application of the Matrix Structure for One General Management Board instead of the Functional Structure used by many PVN’s individual Management Boards that expected to gain the above Objective to PVN’s PPP management

The Delay Factors in EPC Contracts in Vietnam

Many construction projects in Vietnam have experiencing delay which becomes a big problem for each project because of lack of solution. In the construction stage of any project, anticipating many factors that may cause delays is one of the important works of the project manager. Therefore, project managers should give solutions for them before the construction starts. However, sometimes it is not important for each project because both owners and consultants do not care about this. That is why many construction projects are delayed.  There are a lot of reasons that causing delays, including force majeure and human acts. We could not solve these problems absolutely.

Tran Van Trung made a research, which is a general view about delay problems in construction projects such as problems happened during the foundation work, escalation in cost of material, equipment import management for construction, to find out the reasons and solutions for each case. The purpose of his report was to find out the main factors causing delay and affecting other aspects in Thermal Power plants in Vietnam at all stages of projects. These factors were analyzed in different ways of parties such as the Laws, Authorities, the Owners, the Contractors, Consultants, and Sub-contractors. From that, factors which are mainly effective to prevent and control delays in Thermal Power plants can be seen.

The objectives of his study were to:

1. identify major delays in Thermal Power Plants in Vietnam.

2. identify the major cause (reasons) of delays in Thermal Power Plants in Vietnam.

3. recommend strategies for improving project delivery based on the finding from the study.

Conclusion

Delay in the construction industry is a serious problem in general and in all the coal-fired Thermal Power plant in Vietnam in particular. The project investigated in this study exhibits a delay like in all power plants in Vietnam. Therefore, the results of the research provide a framework for project managers who can better understand the dynamics of project management and taking efforts to reduce incidences of delay time.

By administering and analyzing factors affecting the project, this research had identified problems related to delays during construction phase. From these results, once again, it is noted that most causes of delay of the project related to Consultant company of owner who set up F/S and surveyed site conditions before and Fishner Company as A/E of owner. Furthermore, subcontractor as PM caused delay in the highest impact, the quality of its equipment was not reliable and the quantity was not asynchronous in delivery.

In the case of this study, so as to find out the causes, impacts and solutions when facing delay problems, the research had analyzed twelve major factors that cause delay in construction stage. Although these problems may be unprejudiced reasons or subjective reasons, they were also originated by carelessness in the implementation, management or supervision. Then, this research had deeply analyzed other factors that also affect schedule for each case. Therefore, for each delay case, the overall view and solutions for preventing or reducing delays in future projects have seen.

In summary, this research summarized some reasons behind the delays caused to project, and proposed some recommendations which might enable the main contractor organization to develop in the competitiveness to achieve one of the major goals in power plants, on time completion, after that, we can prevent these causes in next projects.

Abstract

In construction industry, a project is known to be successful when it meets three fundamental criteria such as finishing on time within the budget, the prescribed quality requirements such as satisfying customer’s demand and adapt safety in operation stage. Unfortunately, all of Thermal Power Plants built in Viet Nam had problems of project management leading to their delay. Investigating these problems has become project manager’s indispensable demand.

In general, the problems involved with project delays are solvable. In making effort to solve these problems, the critical factors influencing negatively on construction duration need to be discovered. Hence, it is very important to establish a systematical approach that will be used as a tool for the investigation.  

This report will assess and analyze twelve factors causing the delay problems in Uong Bi Thermal Power Plant was executed in the North of Viet Nam. The qualitative method basically is based on the principle of assessing the risk level of factors impacting negatively on the progress of the project, and it is conducted to fulfill the objective of the study.

Finally, some solutions dealing with project delay problems in construction executing stages are proposed. 

A Feasibility Study of a Curtain Wall Testing Company in Hanoi

As there is no current wall test is being conducted in Vietnam, there is a need for the establishment of a quality testing company. Some considerations include:

i) whether such a company is feasible and profitable,

ii) how to process this kind of testing company technically and economically,

iii) whether the demand is high, and what are the architectural demands and trends?

NGUYEN DUY DUC THU made a case study which objectives were to:

1. develop technical and economic feasibility study of Curtain wall testing company

   - To identify demand (volume and market trend) and the needed supply of curtain wall testing company in Vietnam

  - To identify technical requirements of curtain wall testing in Vietnam which includes testing specifications, labs and equipment engineering knowledge competency and quality control.

2. develop business plans and marketing plans.

Conclusion

1. Technical FS

·         Quality control requirement:

The establishment of a testing company will match the quality control requirements as well as improve and complete the quality system in designing, manufacturing, constructing and erection of curtain wall. Besides, it helps research and develop the standards for curtain wall testing in Vietnam.

·         Technology applies:

The technology, method and procedures for curtain wall testing are possible.

It is more favorable for the company to cooperate with another foreign company in terms of technology and program training.

·         Human resource:

There would be no obstacles in terms of human resources since Vietnamese human resources can meet the requirement and technical staff will be trained to efficiently operate and manage the system by the foreign partner.

·         Equipment: The equipment and software can be imported, which is supported by the foreign testing company.

2. Business & Marketing FS

·         Market analysis:

The market demand for curtain wall testing is very promising thanks to the robust development of high-rise building and quality control requirement in the next five years.

·         Finance model:

The company is estimated to get positive profit from the second year of operation.

·         Competitor analysis:

The company enjoys the great advantage of being the pioneer in the business in Vietnam. Although there are some foreign testing companies in the international market, the new company still has its strengths and opportunities.

·         Market entry strategy:

The company adopts the joint venture strategy to overcome the shortage of experience and technology.

·         Law & regulation:

       Administration and licensing procedures are conformed to the authority regulations

Abstract

Nowadays, there are many high rise building had been built in over Vietnam, especially in Hanoi. The building was using for many find of propose such as office building, commercial building, hotels… and others. But they had a common that is using the curtain wall for elevation.

But there’s very difficult in order to testing and qualify this kind of material.

The thesis is focus on feasibility study of curtain wall testing company, under the perspective of technical requirement, business plan and marketing plan. 

Project Organizational Structure roles and Responsibility

The economic crisis started with the collapse of the banking and property sector in the United States in 2008. With various governmental stimulus package in the past months, the economy has slowly picked up its pace. Published data showed a stronger Quarter II in several countries (including China, Turkey, Brazil and Japan) but worries about future growth have increased. Most of these relate to the public debt in Euro Zone crisis and the possibility of a double-dip recession. All the macro-economic factors have indeed a strong correlation to the Vietnam economy as Vietnam mainly exports its goods to the major economy like the United States and Europe.  Therefore, crises happen elsewhere will have negative impact on the Vietnam domestic economy and real estate industry in Vietnam is no exception.

Even though the real estate industry in Vietnam has shown some sign of recovering, it has not been that strong across the various types of real estate products such as office, retail, apartment, service apartment, villas and townhouse.

Latest research from Savills Research and Consultancy also showed that in Vietnam, there is over supply and competition is intense right now. The highly competitive property market is creating two important effects that real estate developer must pay attention to, namely high tenant mobility and a flight to quality. As for apartment for sale in Vietnam, though there is rising demand with estimated approximately 50,000 –80,000 dwellings required per year, the buyers in this market is mainly young population with limited saving. As people tend to be more cautious in personal spending, they will be more selective in choosing an appropriate real estate property for purchasing, renting or purely investing.

The competition among different developers to develop the best housings with the lowest price has brought about the urgent need for organizations to evaluate their own organizational structure and management style. Having an appropriate framework and good organization management structure, the organization will enjoy many benefits. The immediate profit will be that the streamlined organizational structure will be more cost effective due to the appropriate use of resources. Next, good organization structure and management provides an extremely useful tool in controlling every stage of the project and prevent many possible risks.  In the recent times, many projects fail due to lack of good organization management and hence the lack of control.

If a project is well organized, it will bring about high satisfaction for customers, which will in turn generate greater revenue and higher return on investment for the developer. Good organization management structure will safeguard the firm’s long-term survival as well. Though some economists have viewed that the recession is over, other strategists still worry about the possibility of a double dip recession. Having a good organization management will help the firm stand strong in terms of crises. Though profits might be affected negatively by the external factors, if the organizations have good internal systems, they can still manage the firm well and keep the cost used at the minimum level to ensure the firm will survive in hard times.

The above compelling reasons are the key rationales to study in depth the subject of organization management.

TRAN DUC QUANG made a case study which objectives was to study the application of Project Organizational Structure Roles and Responsibility in a construction project from Appraisal, Feasibility Decision to completing -handing over phase. 

Conclusion 

The report attempted to explore and study in depth the key concepts of organizational management and appreciate the various organizational structures, which are relevant to the real estate and construction industry.

Given the very complicated nature of construction whereby each constructions project is unique and may involve many stakeholders, the real estate developer needs to consider both vertical and horizontal ways of structuring its organization and project. That is why matrix structure is proven to be very useful. Furthermore, in different stages of the project life cycle, the tasks required are different and hence the need for different structure during different phases of the project. Knowing when to employ which structure is important, as organization structure is a tool for managers to carry out the strategies set forth.

Having the appropriate organizational structure is essential for the real estate developer, as having an appropriate framework and good organization management structure, the organization will enjoy many benefits such as appropriate use of resources and prevention of many possible risks.  The tool will also help to close up the gap in project governance as good structure will allow constant interaction in between different levels. A well-run project will generate both financial benefits and high satisfaction to the stakeholders involved. It will help the firm stand strong in terms of crises and thus safeguard firm’s long-term survival.

Recommendations

The whole rational of organizational management is to facilitate the application of knowledge, skills, tools and techniques to project activities to meet project requirements in terms of Scope, Cost, Time, Quality, Participant satisfaction. In organizational management, the important steps include:

1.       Choosing the right people

2.      Setting up the right organization

3.      Using the right system

The concept of how to choose the right people for the task and how to set up the right organization has been discussed extensively and expressed in detail at previous sections. There are many organization structures and each one of them discussed above has its own application, advantages and drawbacks. Selecting the appropriate structure for an organization will therefore be dependent on the task, the size of the firm, the subordinates, the managers and the environment.  Managers, in choosing the right organizing structure, need to study its vision, mission and its strategic intent and then strive to pick strategies and structures that are congruent. In choosing the right people for the team, managers need to define of what kinds of skills required, what kinds of individuals required in what timeframes and then select the right people.

As discussed in Literature Review and the Case Study of the Hotel, implementing the best organization management system involves a few stages, starting from finding out the right strategies, to matching the project life cycle stages to the correct type of structure. The case study of Marriott Hotel is a very good example that other real estate developers can study and replicate.

Organizational management aspect of project management includes Human Resource Planning, Acquire Project Team, Develop Project Team and Manage Project Team. Therefore, choosing the right people and organization structure alone is not enough. Managers need to be aware of many other factors that can be the crucial success factors in running the organization such as managing culture issues and facilitating good communication channel. Organizational management also includes active management of the employees in the organization. Making sure employees are well motivated is crucial for organizational management. Below are some the examples of how to manage the employees that firm can adopt:

Providing Constant feedback to employees

1.       Progress Reports: Reports providing feedback to the project team about performance against the project plan.

2.      External Feedback: The project team must periodically measure itself against the performance expectations of those outside the project.

3.      Project Performance Appraisal:  Performance appraisal objectives include re-clarification of roles and responsibilities,  development of team member’s training plans and establishment of specific goals for future time periods.

4.      Performance Reviews: Meeting are held to access project status or progress.

Provide various trainings to employees

Other things that a project management team can do are to send employees for courses to increase his skills sets. The courses that a company can consider are:

1.       Management: Successful conflict management results in greater productivity and positive working relationships.

2.      Cultural Management:  With cultural management skills, employees will be more confident in dealing with people from various backgrounds, especially for the large-scale joint venture project.

3.      Trend Analysis: Forecasting project results over time to determine if performance is improving or deteriorating.

Finally, managing an organization is an ongoing process, and managers need to be actively engaged in running their own company. Once the situation changes, managers need to be nimble in adapting to the changing environment by changing the organization structure.

Abstract

This report focuses on various aspects of the main theme - Organization Management, which is a crucial factor for the success for real estate project.

Year 2007 was a booming year for real estate in Vietnam. Many housing development projects were successful built. However, as the financial turmoil started since 2008, the real estate industry globally has encountered one of the worst hit in the recent history. Competition for developing new housing projects with high quality yet low cost in order to win customer base is intense. In order to survive in this tough environment and emerge as winner, there is an urge for real estate developers to re-look in to building up their organizational structure in order to carry out smoothly the projects in accordance with customer’s expectation and international standards. In general, the success or failure of the real estate development project is dependent upon the quality of the employees, the clarity of the operation, the availability of the resources and most importantly, the appropriateness of the structure and the management system adopted.

This study, which refers to different theories and standards, has studied in depth the concept of organization management. The project indentifies the key concepts of various types of organization and its relation with the construction phases. It spells out the core governance tasks in the area of strategy, structure and organizational culture and suggests the best strategy that a real estate developer should adopt in order to cope with the increasing pressure of the internal and external environment. It further elaborates how to exercise authority and allocate power within an organization.

Finally, the real life case study of building the Five Star Marriott Hotel in Nha Trang City, a complex project that involves various team and parties, will demonstrate the key concepts and application of these concepts.