Sub-Contractor Management in Gas Projects

Most of the general contractors are not paying attention with explanation on interfaced scopes between sub-contractors, selection contractors, and setting the agreement with sub-contractors.

Based on the contract type, contractor for projects managed by PMC-PV Gas is divided into some types such as:

1. General contractor for Engineering, procurement and construction.

2. General contractor for engineering and construction and sub-contractor for supplying equipments and commissioning.

3. General contractor for construction, sub-contractor for engineering, supplying equipments and commissioning.

Therefore, sub-contractor management in Projects is the challenge of project management board for on-scheduling, on-quality, safety and in budget.

If management board does not pay attention with sub-contractor management, it will be caused the chain of effects in delaying schedule, poor quality and cost impact for the whole project.

One research revealed that the cost of rework and change of sub-contractor is 12 times higher of previous cost.

Therefore, pre-qualification and monitoring performance of sub-contractor is the most important in success of General Contractor and Projects.

Phan Thi Hai Giang made a research to study the management method applied for sub-contractor in engineering, supplying equipments and commissioning. His study started from pre-qualification and monitoring performance of sub-contractor.

The purpose of this study was to quantify the importance of sub-contractor management in construction management especially in EPC contract, its effectiveness with general contractor in schedule, quality and cost.

This research started from bidding stage, performing project of sub-contractor in pipeline projects. The objectives of this study were to:

1. Evaluate the relationship between the subcontractor and general contractor in scheduling management, quality control and cost control in EPC Contract.

2) Identify some problems in subcontractor management that can be improved by the general contractor.

3) Investigate the effect of implementation subcontractor management in early stage of construction management.

Conclusion

 

With the strict management and good coordination between Owner, general contract and sub-contractor, the Project is completed on schedule for first gas from Nam Con Son pipeline that is the best benefit for Owner. With on-time schedule, any Parties from General contractor to sub-contractor/Vendor also have their own benefits from their construction works.

The key factor of project shall be identified in the beginning of Project and general contractor/sub-contractor must be followed and tried to archive this goals. In this case study, the key factor of Project was scheduled. The success of project is good co-ordination with general contractor/Owner such as:

1. For quality management:

• All agreement between general contractor and sub-contract will be submitted and approved by Owner because Subcontracts should be made to conform with the prime contract between the contractor and the project owner, and must be revised in accordance with the changes made to the prime contract throughout the course of the project
• Tight and clear specification
•  Dedicated QA/QC Manager
• On-site Vendor Inspection
• Continuous improvement quality management system
•  Rigid control change order in design stage and in Site 

2. For the cost management:

• General Contractors prefer to structure subcontracts so that the contractor pays the subcontractor only if the contractor receives payment from the owner, arguing that they should not be stuck with paying bills that the owner doesn’t pay them for.
• Accurate cost tracking, analysis and forecast
• QA/QC to prevent and detect defects earlier 

3. For schedule management:

• The good planner and updated schedule for all Site work and procurement work that will affected with on-time schedule of Project.
• Tight project control system and dedicated project controller.
• Given appropriated solution for long-lead item.

4. For safety management:

• Good safety procedures with appointed safety manager will be monitored all construction works at Site.
• Risk response plan, emergency response plan and risk assessment applied for safety management of Project. 

Benefit of project sub-contractor management

In almost all projects, general contractor cannot perform their construction works with their own force, they tried to share responsibilities and risks with their sub-contractor/Vendor.

From the above case-study, the good communication between general contractor and sub-contractor had distributed to the success of Project. It can be described in the beginning of the contract. The content of the service which sub-contractor is to provide for the general contractor must be described; and it also articulates the general contractor's procedure of awarding the subcontractor.

 The general contractor assumes their role and contracts out the construction work, some detail design works to various specialty subcontractors in order to control risk and transfer construction risks. Through sub-contracting, the general contractor can minimize its capital investment and reduce the size of permanent staff.

The general contractor did not understand clearly the local regulation, work permission with existing gas facilities. So they use local sub-contractor to transfer their risks.

With good management of sub-contractors, the general contractors will have a successful project in manner of quality, safety, schedule and cost. And local sub-contractor can become more professional through tight control from general manager.

General Conclusion

This project is successful in the manner of subcontractor's management. According to discussion from the previous chapter, it can be concluded that subcontractor control management in terms of procurement and cost from local contractor has been aligned and organized, but, in terms of schedule, quality and safety aspects, it has been yet organized. Major improvements are needed for the subcontractor control strategy in order to improve the subcontractor management performance. In contrast, it can be concluded that subcontractor control strategy has been aligned and organized in all aspects. However, there are some major points, which need to be improved in order to strengthen and continually improve the strategy performance.

1. Recommendation for sub-contractor management improvement

After learning on how main contractors managed their subcontractors together with the strength and weaknesses of each strategy, recommendation for improvement can be reliably proposed as follows:

i) It is important to have formal procurement standard for subcontractors. It helps main contractors to make decision easier and faster whether the subcontractors are qualified with the main contractor’s commitment. 

ii) Always have two-way lead times built into subcontract agreements. Two-way means that the main contractor and subcontractors agree on an appropriate time for the main contractor to notify the subcontractor when to begin work and an appropriate amount of time for the subcontractors to inform the main contractor of any conflict. Main contractor should monitor subcontractor’s schedule by developing a system or adopting advanced technology software that allows main contractor to track causes of schedule variance.

iii) Top management should take a leader role in commitment toward quality. There should be quality policy and activities performed in an effort to implement the quality policy. Subcontractor should understand the quality policy and follow it as a quality standard of the work. The problems related with low quality can be prevented.

iv) By establishing a subcontractor database, main contractors are able to know the information about subcontractors. It helps main contractors to have better understanding subcontractors’ performance.

v) Main contractor should develop comprehensive project safety policy and safety programs which make provisions for subcontractor safety. Subcontractor has to obey the main contractor’s safety policy and follow the main contractor’s safety programs by the inclusion of specific language to that effect in their contracts.

vi) Main contractor may consider employing subcontract coordinator in order to improve coordination and communication with subcontractors.

2. Recommendation for further study

i) This research was concentrated on main contractors’ behavior in managing subcontractor. However, there are owner, consultant, and subcontractors whose self involving in the construction project. Further study should be carried out to find the influence of owner, consultant, and subcontractor itself for subcontractor management improvement.

ii) Due to time limitation, only one international contractor was included in this study. Further study should include more contractors in order to get better result.

iii) It is highly recommended for further study to investigate the effectiveness of each strategy by quantitative data.

Abstract

Because of the increased project complexity and the highly competitive nature of the construction industry, a construction project often is executed by several subcontractors. Hence, effectively managing the numerous subcontractors involved in a construction project becomes a crucial challenge for the general contractor in ensuring timely project completion with acceptable quality.

Managing subcontractors does not simply involve asking them to allocate resources (labor, material, and machinery/equipment) into the jobsite whenever an activity is scheduled, and then pushing them to speed up the work without a clear consciousness of schedule risk. Factors (or uncertainties) such as weather, labor, site conditions, material delivery, and equipment breakdown can influence the time performance of subcontractors, affecting total project duration.

But almost General Contractor is lack of management sub-contractor and it caused many difficulties and conflicts during performance, management of projects.

The most difficulty of sub-contractor management is deviation scope of work between sub-contractors, controlling schedule and interfacing between subcontractors.

In managing project subcontractors, a general contractor must determine the items of work to be subcontracted, select subcontractors, set subcontract agreements, and control the subcontractors during construction.