Communication Management within a Construction Project Team

The construction industry in Vietnam, especially commercial building sector, is now suffering from many problems regarding communication management. Some common problems are:

1. Usually skipping communication management or just approaching it shallowly due to lack on this knowledge area.

2. Problems related to interpersonal communication (such as face-to-face meetings), intra-group communication (such as interactions between team members) or inter-group communication (such as interactions between main contractors and sub-contractors) occur very frequently at many projects. Consequently, projects communication often breaks down and projects are likely to be failed. 

3. Unable to determine project stakeholders’ needs for information, unable to determine communication channels in projects, insufficient interaction between project management and team members or between main contractor and sub-contractors or within team members, inappropriate communication media, etc.

4. Timing of distributing information, correct information to correct stake holders, wasting a large amount of time and resources for unnecessary meetings, etc.

5. Unable to combine verbal communication and non-verbal communication in order to achieve targets.

6.Abusive use of bad emotional methods during interaction between project management and team members such as fear and threats, aversive stimulation, etc.

Therefore, it is important to understand the nature of problems and to find ways to solve them in order to be able to develop an effective communication management system in construction projects. Nguyen Canh Toan made a case study which objectives were to:

1. investigate the communication interactions within construction project team so that communication problems causing project interruption can be identified.

2. propose recommendations how to improve communication management within construction project team.

Conclusions

2 

The important role of communication management within construction project team was clarified. During construction phase, interactions within the main contractor’s team members and between the main contractor and subcontractors were analyzed. Communication problems were classified into three categories, i.e. coordination, information distribution and interpersonal communication. And problems relating to coordination category occurred most in the project. That caused project delays many times. In order to solve the problems, proposed solutions based on theoretical and recommended practices including guidance from the PMI’s PMBOK guide, one of the world’s most prestigious guides to the project management, were presented. Besides, some useful tools were considered and suggested to use as the aids for the project managers to improve communication management in the project.

However, there are some limitations in this study. Firstly, relationships between communication problems and types of information in action have not been graded in order to figure out which one is the biggest factor that causes communication interruption; or the applicability of the proposed solutions for those problems.

Recommendations

3 

In order to avoid similar communication problems, the following recommendations have to consider:

1. Project Manager shall prepare project management plan including communication plan in the beginning of the project.

2. Strictly following the communication plan. Incentives shall be provided to encourage everybody to carry out it properly, and also treatments or even punishments for bad behaviours.

3. Document controller position must be stable as much as possible in order to ensure that the information distribution process is in order.

4. In case of ISO certified company, Project Manager should give feedback to the company Quality Manager to add in personality test forms together with Job Application Assessment Procedures forms. That will save Project Manager’s time whenever there is new job applicant coming to job site for interviewing.

5. Using new information-conveying methods such as: web-based data distribution, e-meeting, etc. in order for easy document control and timing of document distribution.

6. Organizing trainings for the team members in order for them to know how to use both verbal and non-verbal communication effectively.

7. Outside activities such as playing football, parties, etc. are recommended to improve relationships among team members and between the main contractor and subcontractors.

Abstract

Communication management is one of the nine knowledge areas that can be found in the Project Management Institute’s A guide to the Project Management Body of Knowledge. This is a really tough challenge and time-consuming task to any project manager. Despite the fact that ineffective communication management will result in project interruption or even failure, there are not many project managers or site managers in Vietnamese contractors being aware of its importance. This final project report focuses on construction project communication management between the main contractor and subcontractors as inter-group communication and within the main contractor team members as intra-group communication. By reviewing many researches and studies of many authors on this field, knowledge as regards communication management within team and with external party such as will be explored step by step. Through a case study of condominium project in Ho Chi Minh City, communication problems which cause project interruption will be investigated and analyzed. Some proposed solutions which are based on the reviewed knowledge will be discussed in order to help project managers improve communication in the project.

Marine Facility Design and Its Impact on Project Cost in Refinery Projects: A Case Study Of Nghi Son Refinery and the Petrochemical Complex Project

Most construction projects begin with recognition of a need for a new facility. Long before designers start preparing drawings and certainly well before field construction can commence, considerable thought must go into broad-scale planning. Elements of this phase include conceptual analyses, technical and economic feasibility studies, and environmental impact report.

For example, location is fundamental to planning for a new industrial plant. Where the plant can be located to provide desirable, nearby employment for an adequate supply of skilled and productivities workers? What are the present and projected costs and customs associated with the labor force? Depending on the natural of its raw materials input and its products, will the plant have access to the most appropriate and economical forms of transportation, be they air, water, highway, rail or pipeline? Does the local provide access to raw material and to market? Are there adequate sources of energy, including gas, oil, and electricity; and are there convenient communication facilities? What political or institutional factors may ease or impede development and operation of facility? What will be the sociological and economic impact of this plant on the community? What will be environmental impact? What do all these factors taken as a whole, mean for the technical and economic feasibility of the project? Perform the feasibly study to ensure the effectively of the project.

The problem involved in getting a project started probably:

• Design concerned by possibility that owners spend a lot of time and money
• Uncertain as to what the Scope of the project should be
• Worried about how much it is going to cost

Especially, refinery project have a lot of items to study and design including marine facilities, which affect to cost. Le Tu Anh made a research to study how design and selection of an optimal location for marine facility of refinery project affects to project cost.

Conclusions

The Nghi Son refinery and petrochemical complex project has been studied for long time. In this research, the following were proposed:

Firstly, the research was performed and then economic analysis was established. The data was used for analysis based on the Primary design of marine facilities.

Second, the projects begin with recognition of a need for a new facility. Long before designers start preparing drawings and certainly well before field construction can commence, considerable thought must go into broad-scale planning. Elements of this phase include conceptual analyses, technical and economic feasibility studies. All the factors taken as a whole, mean for the technical and economic feasibility of the project. The costs of the marine facilities are estimated. The research shown the optimal design and how impact to the project cost. The owner determines time, money and scope of the items.

Finally, an analysis on the result of the plan showed that the project was well planned, project bring high advantage to owner.

Recommendations for further study

Since the amount of investment for Nghi Son Project has been the biggest in history, here in Vietnam, the financing arrangement for the project is challenging. In order to deal with the complexities of the project in reality, it is recommended that the research conducted in this thesis should be extended to take into consideration the following issue: It is necessary that the Government to grant special incentives and support to improve the viability to enhance Equity IRR of the Project. Based on this concept, the investors would like to propose following incentives and Government supports, most of which have been accepted by the Government. - Initial dredging for product jetty, crude oil jetty (SPM), including harbor (water basin) and channels.

The Dredging volume is big so the Vietnamese contractor cannot be sufficient capacity during a short time. Then Government should give special international contractor who have competence implement the dredging item in the project.

Annual dredging cost of entrance channel will be shared with the Government because the channel is used both Export product jetties of NSP and berth No1 &2 of Local Authority.

Abstract

The refining industry is one of the key industries playing a very important role in the development of the national economy. In addition to ensuring the national energy security, i.e. the supply of strategic energies such as LPG, gasoline, kerosene, jet fuel, diesel, etc, the establishment and development of this industry with the building of refineries will pave the way for the other related industries such as petrochemical industry, basic chemicals production, petroleum products transportation, storage, trading and distribution.

Additionally, the existing of the refineries will definitely bring about positive benefits in the socio-economic fields as well as the national security and defense, making contributions to speeding up the process of industrialization and modernization as proposed by the Government of Vietnam.

Therefore, this thesis deals with how design and selection of a optimal location for marine facility of refinery project to reduce project cost.

Engineering, Procurement and Construction (EPC) Contracts Performance in Oil and Gas Industry

Today, oil and gas companies prefer to sign the EPC contracts than other forms of contracts so that they can avoid and reduce any conflicts in execution of contracts due to interfaces and risks between project companies and contractors and easy to control the projects in every aspects.

EPC contracts are often used in medium and large scale oil and gas projects in Vietnam since 1990s. According to international practices, in case of any disputes or problems happened in the execution of EPC contracts, those problems and disputes shall be referred to clauses of EPC contracts and settled by arbitration in accordance with the signed contractual clauses and conditions. In Vietnam, some projects are usually built to meet the socio-economic issues and often guided by the Government. So it is a bit difference between the Vietnamese and international practice. Hoang Huu Cam made a study which aimed to focus on the following issues with regard to GDC Project’s EPC contract:

1. Delay in commissioning activity.

2. Consequences of the delay.

-    Extension of Time for Completion to EPC Contractor

-    Compensation for EPC Contractor

-    Compensation for Certifying Agent

-    Compensation for BP

General Conclusion

1. The successful factors of the Project

There were two factors resulted in success of the GDC project. The most important factor was tendering process and selecting the right EPC Contractor for the right works. The EPC Contractor, DWE, has much experience in engineering, procurement and construction. Besides, the Sub-contractor, Petrovietnam Engineering & Construction Company (PVECC) is one of the leading contractors in oil and gas industry of Vietnam.

Another factor was that the project management was very good during construction period. The EPC Contractor applied the latest project management knowledge for the project at that time and the Project Company was very satisfactory to this matter. Through this project, with the purpose of “on-job-training” both Subcontractor’s and the Project Company personnel obtained much experience and project management knowledge from EPC Contractor.

2. Adversely Impacted Factors on GDC Project

The first thing PVGC faced with was that it had less authority to control the relationships between the project’s stakeholders as well as responsibilities between them. This happened because a substantial part was mechanism in economic and business activities in Vietnam. Over 20 years of “Doi Moi” process, Vietnam has pursued a Socialist Oriented Market Economy which is a model that has no existence in the world so far. Vietnam has been seeking its own way on the road of development and protection of the country. Hence Vietnam has a lot of things to do in the process of global economy integration. Vietnam also became a member of World Trade Organization in 2006 and it needs time to change its existing legal system and business environment. These changes will create an equal and fair business environment for every enterprise including all businesses in all economic sectors.

Recommendations

Today although EPC Contracts are popularly used for medium and large projects in infrastructure and in oil and gas sector, but the success of applying the form of EPC Contracts are still dependant on both jurisdictions and practices where they are used for. In countries where jurisdictions are very stable and stringent, the application of EPC Contracts is very easier and more advantageous than that in countries where jurisdictions and legal systems are less stable and tight.

Based on the case study and analysis, the following recommendations can be made:

For the project company, PVGC:

- PVGC must have a program summarizing all projects have been done and analyzing adverse factors in order to prevent similar situations occurred in future projects.

- PVGC should make a proposal submitted to PVN and EVN to ask them speed up their gas customers to catch up the construction schedules planned during GDC construction period.

- PVGC should set up a risk management program for each project from the beginning to completion of the project.

- In order to minimizing any loss which may be incurred in the future projects when having a participation of any foreign company as stakeholder, PVGC should have more close relationship with its customers and have some agreement like off-take agreement.

For the EPC Contractor, DWE:

Because the DWE was the foreign EPC Contractor, therefore the EPC Contractor had to scrutinize the local legal system, practices and the economic mechanism in order to evaluate and foresee any situation he may face with in the construction period. The following issues needed to be taken before signing the EPC contract or sometimes are called contract signing checklist.

1. Review your Bid: DWE should review its Bid carefully before starting the signing of EPC contract.

2. Review complete plan: Before signing EPC contract; DWE should review all plans including sub-contractor’s plan, and the plans of other parties involved in the project.

3. Another aspect the EPC Contractor should study laws, regulations and other statutory documents that may affect the EPC Contractor during its execution of EPC Contract.

Abstract

Engineering, Procurement and Construction (EPC) Contract is widely used today in the world in general and in Vietnam in particular. Especially in oil and gas industry EPC contract is getting more and more popular and is often involved in medium and large scale oil & gas projects. According to an EPC Contract a contractor has obligation to hand over a complete facility or complex to a Owner (or client) who needs 'turn a key' to begin operating the facility, therefore EPC Contract is now and then called “turnkey contract. Besides delivering a complete facility or complex, the contractor shall deliver that facility or the complex at a guaranteed price until a guaranteed date and he has to undertake the construction work to satisfy designated specifications, requirements or to the specified level. Any failure of his obligations to comply with any specifications or requirements will often bring the contractor to bear monetary loss and liability.

Vietnam Oil & Gas Group had an early stage to get an application of EPC Contract forms in 1990s when Vietnam had suffered the United States of America’s economic trade embargo against all of its social and economic aspects. All EPC contracts that were used in oil and gas projects in Vietnam at that time always had foreign participations or involvement on those projects and most EPC contractors who undertook the projects were foreigners. After United States of America lifting its economic and trade embargo against Vietnam to date, the use of EPC contracts has been spreading to various industries and sectors, especially for ODA (Official Development Assistance) projects such as infrastructure projects where capital had been funded by foreign countries, regional and international financial institutions. The uses of EPC contracts are very common in energy projects like power generation plants in recent years in Vietnam.

However, there is still debate on the use of EPC contracts in Vietnam, because of Vietnam’s legal system, practices in construction industry and other matters.

This study will only be focusing on the use of one of EPC Contracts in the oil and gas sector in Vietnam – Phu My Gas Distribution Center (hereinafter referred to as GDC) and state the advantages, disadvantages and problems of EPC contracts applicable in oil & gas projects in Vietnam. How to resolve the problems in exercising EPC contracts and measures to be taken to prevent the problems will also be raised in this study.

Safety and Quality Management for Construction of Temporary Structures with Reference to Construction Regulations and Contracts in Vietnam

The fatal accidents happen everywhere. These accidents not only influence the workers and projects but also have direct effect on money and time. It normally takes much money to compensate the loss of workers and to repair the damages of the project and many other expenses. Besides, it consumes much time during accident investigation, designing, repairing and sometime for legal questions.  

Some people think that accidents are unavoidable. Hoang Don Dung made a study to improve and analyze every aspect of the problem in detail and propose recommendation. The objectives of his research were to:

1. analyze the reasons of the recent construction accidents in Vietnam which are related with the quality of temporary structure.

2. apply the regulation of Vietnam government and FIDIC contract to study these accidents.

3. give out some recommendations to improve the safety and quality of temporary support structure in construction process.

Conclusion

Studying occupational accidents happened in the past. We can recognize that there were two kinds of them: predictable or unpredictable. But the damages of these accidents were taken by human. A predictable occupational accident means avoidable if we do the right work. Most accidents of temporary construction structure in the past are predictable and avoidable but they have happened because the behavior of construction employees is subjective.

Many people at site often think that every temporary structure is just serving for executing a super-structure, it is not worth for long time. The executing weight loading on temporary structure is short-term load, too. The owners or customers won’t check it closely and in detail like other parts of project. In fact, some kinds of loading capacity may load on super-structure but not on temporary structure such as loads defined by probability, loads following seasons, earthquake, etc. This makes ideas of disregarding the temporary structure systems.

In many projects, temporary structures have not been considered as superstructure in processes of designing and executing.

That means before implementing the temporary structure at site, it must be designed in detail attending the applied standard and codes. The design drawings and specification must be verified and accepted carefully by the Engineer/Supervisor as defined by Fidic terms or Vietnam Decree 209 to the superstructure.

Before implementing the temporary structure at site, its materials must be tested based on the applied standard and codes. Contractor may use old material but loading capacity must be ensured. Besides, using materials for the temporary structure must obey specification.

Contractor’s technical staff and owner’s supervisor must supervise and accept temporary structures carefully to achieve technical requirements defined by approved design and specification.

Recommendation

To solve the problems, the support of authority is indispensable. Government policies should have to regulate besides the regulations that were defined in Decree 209 (or the Fidic conditions of contract if applied) as follows:

a. Every temporary structure must be behaved as superstructure in designing and executing process.

b. Contractor’s employees have to be trained appropriately. They have to have proper profession certificates.

Abstract

Years by years, the persons who do their routine work at construction site still try to devote themselves to their jobs. Now and then there is information of a construction accident happened somewhere, they hear information and feel sorry for their coworkers. Then they can forget it at once because they think simply that accident was not their case; it does not relate to them.

Is that true? Don’t they relate completely and absolutely to any occupational accident though it happens out of their construction site? The answer is no because each of them is playing a roll in construction sector. Each person has his obligation of occupation. Somehow, by his opinions or activities he can help either to prevent accidents or reduce damage. He may not keep it for himself. Therefore those opinions must be written down.

This report writes about occupational accidents happened in Vietnam construction site in several recent years. The accidents happened by poor-quality and un-safety of the different temporary structure systems at the different site but basically the causation is human. They did not put all their consideration to the temporary structure because it’s non-permanent. In fact, they did design, manage, execute and check the temporary structure carelessly. 

The author hopes that this report will give a more opinion to persons who do their routine work at construction site related to temporary structure systems. They will play very well their rolls at site as defined by government regulations and/or terms of Fidic contract.

Contract Management How Owners Can Be Responsible For Changing Orders in Oil and Gas Project Management

Vietnam oil and gas industry ranks fourth in oil production in Southeast Asian countries. To develop the gas market, petroleum refining, petrochemical, petroleum trading and distribution, expansion and development of petroleum services to build an integrated petroleum industry, the total investment needs for the petroleum sector are projected at US$ 30 billion within 2006-2025 periods in which the investment from partners is about US$ 14 billion. (Source: Vietnam National Oil and Gas Group, “PETROVIETNAMs development strategy to 2015 and orientation toward 2025”). It means that many contracts will be signed in the future to realize the strategy.

However, during the implementation of the oil and gas construction contracts, many requests for change order from the contractor have been sent to the owner but many owners never respond in time. Sometimes it cause project delay because contractor spends extra time in waiting for the owner’s approval change order and the contractor claims for money or extends the time of the project.

Due to these cases, many oil and gas projects overrun cost or cause delay, so how could Owner manage change order request in time to reduce extra expenses and the project could finish on time. Do Van Hanh made a study which main objectives are:

1. How owner could minimize change order in pre-contract phase.

2. How owner could respond to manage change order during construction phase

3. Analyze the practice of change order through a case study of offshore oil and gas construction project.

Conclusion

All construction projects, even the best planned projects experience change, and there will be cost impacts and disruptions associated with implementing the change. The Author realizes some keys to managing the change such as:

1. to be knowledgeable about pricing change orders and understand the potential for changes to have additional impacts beyond the direct cost of the change;

2. Owner should prepare a contract form with adequate clear clauses and terms that prescribe that contractors have to respond to engineering, procurement, construction and install, and time limit for each parties to respond when a change order happens;

3. owner and contractor should set up a good communication;

4. both owner and contractor should assign contract management and contract administration to a well-experienced person;

5. Owner should hire a well-experienced and professional consultant company to manage the project.

a.) By understanding and including these costs in early change order pricing, both the owner and contractor can have impacts associated with changes and can limit conflict and claims later in the project. Furthermore, by understanding and implementing these change management steps, the changes of the parties resolving the outstanding change orders more effectively and efficiently during the construction process greatly increase.

b.) If Owner prepares a good contract form with adequate clear clauses, term, standard, norm and criterion that prescribe clear responsibility, authority of each party, it will be easier to have an agreement during negotiation.

c.) Communication is very important help to solve the problems; it helps owner and contractor to understand each other. If Owner and contractor have a good communication, both parties will easy to have an agreement.

d.) If the owner assigns the contract management to an experience administrator, he or she is knowledgeable in terms, clauses, and how to solve each kind of situation.

e.) A good consultant will help the owner to collect information, keys finding and give a good advice to solve the problems.

Abstracts

Viet Nam is a developing country needs to develop projects to build infrastructure, investment production base is a huge. However, the new approach and experience should not have management contracts particularly weak resolving issues, related to treatment change order. Many owners do not have the experience or the responsible handling of problems arising inappropriately caused the projects’ capital increase, and project delay.

In this report, the author wants to highlight the theoretical overview to investors arising manage and resolve them effectively. Also make some recommendations to reduce the risks of change order due to the project caused.

Furthermore, the authors also offer a case study and analysis baked each issue during project implementation, thereby giving recommendations as well as the lessons and conclusions for management change orders of investors.

Factors Influencing Benefits of Projects

Most construction projects begin with recognition of a need for a new facility. Long before designers start preparing drawings and certainly well before field construction can commence, considerable thought must go into broad-scale planning. Elements of this phase include conceptual analyses, technical and economic feasibility studies, and environmental impact report.

Mr. Dang Viet Cuong made a study to address the limited factors affecting the economic efficiency in the work of the project feasibility study and proposals, solutions to ensure effective project. Including the issues such as the follows:

-  Select location and content requirements of the Project Owner

-  Market Research Project

-  Solutions of design

-  The related costs

His thesis deeply analyzed how the plans of design influence to efficiency of the project and make appropriate recommendations, and adjustments to ensure the economics of the project. The purpose of the research is to systematize the implement of setting up the investment projects started from the selection of location, market research, solution design and construction measures for the purpose of ensuring economic efficiency project.

Conclusion

Based on the market studies of this project, requirements of investors as well as the solution design, the difficulties and advantages of the project are evaluated as follows:

Difficulties:

-   The efficiency of hotel investment project is low.

-  The Scale of works is large and complex, so process requires well-organized of security, sanitation, management.

-  Features links between building blocks reduce privacy and about the process for green to win.

-  The costs of maintaining the fitness center, swimming pool and sauna will be very high: Costs of swimming pool maintenance, costs of sanitary pipe, personnel costs of continuous inspection and maintenance of sanitation in areas.

Advantages:

-  Characteristics of the population: there is area of developed community, higher living conditions.

-  Large scale projects will help to achieve a better deal and reduce maintenance costs per unit area.

-  The ability to combine and save costs if we use and share the system control, security, administration ... between the works together.

-  To ensure the economic efficiency of the project, we should focus on two main issues as follows:

1.         Development orientation of the project:

-  It is necessary to have a scientific and long-term orientation for the entire project in accordance with the assessment, analysis of market demand to avoid given the subjective, impulsive orientation.

-  This project only made the security design and costing investment but not to set up the business plan and for the restore process. This is very important and must have been studied from the beginning to achieve synchronism for project.

2.         Research the safety design

  The Underground:

-  Redistribute the land boundary between the office block, apartment, hotel (from basement to ground floor) and determine the use of each function areas.

-  Review technical planning area, M & E.

-  Divide the number of parking spaces to fit over the block.

  The Hotel:

-  Change of use from hotels to apartments to suit the needs of the market.

  The Office:

-  Necessary to determine a standard office class A or B in order to have adequate choice in types of materials complete

-  Adjust the design to increase the use of performance floor – Office area with the aim of achieving the efficiency 85%.

  The Apartment:

-  Adjust the design to increase the use of performance floor - Apartments aiming to achieve the efficiency 85%.

-  Adjust the structure, proportion and number of apartments to suit the market demand. Specifically reduce the number of large apartments, increase the number of apartments under 120m2 to suit the large segment of the market.

-  Decrease the investment rate to reduce the price, which increase the liquidity to meet the needs and generate greater attention for the product of apartment projects

Abstract

The major task in Hanoi’s plan is concentrated to the investment, construction and development of the Capital to be a civilized urban, including basic completion of ring roads No.3, three big bridges crossing Red river, construction of some urban railways, continuous development of new and modern urban areas to the South, investment of new urban areas on the West Lake and improvement of old apartment buildings. Furthermore, the construction of new urban areas on the North of Red river, development of water drainage plan, phase II shall also be taken into account. Five concentrated urban sewage treatment plants shall also be constructed and set into operation.

Beside above-mentioned important projects, Hanoi shall also concentrate on developing the service branches and fields as: tourism, trading, finance, banking, science and technology, public health, education and training, public transport and consulting services.

Developing solution: preparing to implement the service commitments within framework of ASEAN - WTO; constructing the development project of 4 types of markets including: capital market, stock market, real estate market, science and technology market and labor market; constructing cooperation  mechanism between Hanoi and central, provincial organs and cities in the whole countries; to provide favorable conditions in terms of administrative procedures, investment policies for enterprise to develop their services.

The city is calling the foreign investment to high quality services, to meet more than FDI-funded 30% capital; to utilize efficiently the investment, trading and tourism promotion activities through great International events which are organized in the capital and cooperation programs of Hanoi with big cities in the world to extend the high quality service market and transfer of technology and human resource training.

The City is implementing the support policy, cost cutting, enhancement of competitive capacity of businesses; to help the businesses to construct, develop and broadcast the trademark; to encourage and honor the enterprises with effect business. The periodical dialogue between City and enterprise leaders shall be committed to annually organize to solve the difficulties in investment, to meet the development requirement of the Capital.

Some major development criteria to 2010:

+ Annual average GDP growth speeds from 2006-2010: reaching 11-12%.

+ The export turnover growth speed: from 15-17%/year.

+ Social investment growth: 17-20%/year.

+ Telephone density: 85-95 telephone/100 people.

+ Scale of population: from 3.6 million to 3.7 million people.

+ The rate of pour decrease to below 1%.

+ Averagely urban residence 9-10m2/person.

+ Urban fresh water supply 140-160 liter/person/day-night.

+ Public transport meeting 30-35% people’s demand.

Hanoi is proud to be a wealthy economy, with young & active human resources having great aspiration of their city and country, as well as an environment with more and more increasing encouragement policy though it is still on development.

In the stable economics and consumption development, the need on properties is more and more increasing with remarkable speed. Due to the increasing income, the demands on better accommodation, commodities and recreation goods also increase. The interest of foreign foreign enterprises in making business in Vietnam also more and more increases, especially when Vietnam has become a WTO member. As a result, it leads to the urgent and great demand on high-quality Office, Residence and Hotel.

Therefore, the development of high-grade International-standard senior Hotel, Office and Apartment in Hanoi is very essential and with economic efficiency. By this way, it contributes to bring the comfort to foreign investors to Vietnam, meeting the necessary demand to social life. Concurrently, project also contributes to develop the Vietnam tourism, enhances the cultural exchange between Vietnam and Countries all over the world, as Vietnamese Government’s opinion, to widen both domestic and foreign exchanging and cooperation relationship. Moreover, the participation of foreign enterprises in general and project in particular will contribute an income to State budget and provide work opportunity for Vietnamese labors, and indirect contribution to social stabilization.

This thesis will address the limited factors affecting the economic efficiency in the work of the project feasibility study and proposals, solutions to ensure effective project.

Contract Clauses in EPC Thermal Power Projects

The world’s electrical energy demand is increasing very fast with the development of economic and population growth. The data show that in 2050, the world’s population will be increased by 50% with 9 billion people, and within 20 years, the demand for oil consumption will increase for about 35% while the demand for energy will increase 65% (in both oil and gas, coal, nuclear energy, renewable energy). This will bring many difficulties for developing a stable economy, especially in the developing countries.

In Vietnam, there are 27 Thermal power plants (TPP). There are several phases for building facilities a thermal power factory which requires special vehicles and equipment to install these at its designed location factory. The overall project duration for developing a thermal power factory normally takes 2 to 3 years depending on the size of the facilities to be built.

Developing the facilities for a thermal power field such as platform, Thermal power Companies (hereinafter referred as the Project Company) normally sign an EPC (Engineering, Procurement and Construction) contract with the EPC contractor. For this field of industry, there are not so many EPC Contractors in the Asian South East countries who can execute a full EPC project. Therefore, the EPC contractor is normally selected and awarded thru the international bidding tender. The major factors for executing an EPC project are the contract clauses which are normally stipulated too generally with unclear understanding and interpretation when having disputes between the contractor and the project company. Therefore, studying the method to develop the effective clauses in the EPC contract is necessary to simplify, and to make the involved parties to understand and interpret clearly during the contract negotiation prior to the EPC contract signing and commencement. The understandable and applicable contract clauses will help an EPC project to be executed smoothly and effectively.

In order to minimize the interfaces and risks between the separated contractor and the project company during executing an thermal project, the thermal power companies normally prefer to award and sign an EPC contract with the EPC contractor, however, this project delivery method will take a lot of time to make clarification, explanation and get the mutually agreement on the contract clauses between the contractor and the project company. The following problems are normally involved with the EPC contract clauses:

 i.        Take time to make the clarification and finalization before contract signing;

ii.        Wrong understanding and interpreting of stipulated clauses in the contract;

iii.        Conflict between contractor and the project company during project execution.

An EPC contract is generally applied for developing the thermal power project, in case of problems or disputes happen during the project execution, then these problems and disputes shall be resolved in accordance with stipulated clauses in the signed contract. Therefore, Bui Tien Dung made a case study to focus on the following issues related to EPC contract:

1. To study EPC contract process and management from literature review;

2. To study the contract clauses in EPC thermal power project;

3. To study the implementations of the contract clauses and their performance with reference to project advantages and problems.

Conclusion

1. Summary of contract clauses

Results from this report discuss and focus on some clauses applied for an EPC contract for developing a thermal power project as well as other EPC contracts in the construction industry. These clauses are normally defined and given by the Project Company in order to protect the project objectives and the Project Company from any kind of risks that may happen. However, from the contractor’s point of view, it will be very risky if the Contractor complies with all these clauses without any exception or amendment. Therefore, providing the effective clauses based on the project documents and the Project Company’s interest shall be addressed during the bidding preparation and negotiation.

In summary, the effective clauses are the terms and conditions stipulated in the contract which shall be defined based on the interest and “win-win solution” basis for both the Project Company and the EPC Contractor.

2. Conclusion for important clauses in the contract that clearly identify risk, roles and responsibilities of each party

As discussed above, the EPC contract is quite complicated in terms of legal issue, therefore, the Project Company and the EPC Contractor shall have enough experiences and knowledge about the nature of project facilities in order to avoid their faults and minimize the risks during contract performance.

The Owner wishes to transfer all of the construction risks to the contractor and be certain of his commitment. Usually, the responsibility for the package is vested in a single contractor, and bid evaluation is straightforward. The contractor agrees to carry out the work for the amount of money stated in the contract regardless of its actual cost as long as there is no change or breach of contract from the owner. This is quite common for schools, warehouses and similar works where the scope is relatively well-defined and the work is straightforward.

In this project, a fixed price lump sum turnkey contract is identified as the most suitable contract strategy provided the project could be completed within the owner’s budget. The owner can utilize model forms for the contract based on other projects procured in this manner.

3. Conclusion for the EPC project performance and how the contract contribute to the performance

The contract clauses are the most important tool to manage the EPC project. Therefore, the involved parties (Project Company, EPC Contractor) shall understand and know how to apply this tool effectively to manage the project in term of costly, time and quality performance.

The contract clauses will be only effective when these are defined and stipulated in accordance with the project specification, documents and nature of work to be performed. Finally, these clauses also are established and finalized according to the mutual agreement between the Project Company and EPC Contractor.

 

General Conclusion

In conclusion, the major clauses in the EPC contracts are not the same for all project, these also depend on each project scope of work, complexity, specification and documents, the project company’s requirement and expectation and mostly on the outcome of contract negotiation between the Project Company and the EPC Contractor. Therefore, the meaning and application of major clauses in the EPC contracts shall be different in term of the standard form contract such as FIDIC or other organizations as well as in each kind of industry such as construction, etc.

Abstract

Nowadays, the EPC contract is very wide applied in energy industry (specially in thermal projects) in this Region for developing an energy field project, this EPC contract is as a “fast track” tool to reduce the project duration. In order to execute this kind of contract successfully in term of the benefit for all involved parties, it is necessary to focus on some key factors that shall be affected on the project during execution phase i.e... contract terms and conditions clauses. Therefore, understanding and interpreting the application of term and condition clauses clearly in EPC contract will help the project to be executed and monitored by using the proper manning level in accordance with project specification and the project will be achieved its goals without the minimized disputations and conflicts happening.

This study will also discuss on the advantages and disadvantages of EPC contract from both Contractor and Project Company’s point of view and how to manage the EPC contract in accordance with term and condition clauses stipulated in the signed contract documents; how to resolve problems by understanding the contract clauses. However, the improvement of some major clauses are still needed in order to specify and define clearly the duties and responsibilities as well as obligations of involved parties to minimize the conflicts, interfaces, risks and disputes that can be happened during the project execution phase.