Method and Effectiveness of Feasibility Study in Apartment Project

In the real estate investment business, decision making is very important which influence the success or failure of the project. One of the its significant stages is Feasibility Study stage.

Based on the characteristics of construction industry, which has high uncertainty, many risks occur during Project Feasibility Study. Therefore, this problem will influence to the decision making of the project and its profit. The main construction factors should have been anticipated and calculate into the feasibility analysis so that risk will not happen and

may become advantage for the investor.

Le Mien Thuy made a case study which objectives were summarized as follows:

1. Framework of FS in Apartment Project.

2. To study the application of the framework in project case

3. To find the problem in FS for Apartment Project

4. To proposal the solution base on theory.

This issue is more significant to some of these construction investors facing serious problems with budget control, as an effective budget control is critical for investing in large projects. Construction project management, which includes project Cost Estimation, is an area of weakness for those investors who want to expand or invest more in the international construction market.

Conclusions

The successful project is determined by Feasibility Study. This is one of the most important stages of project life cycle. There are some problem occurring in Feasibility Study and what we should do to prevent in future project are the following:

1. Incorrect assumption: The people conduct with good experience in construction industry.

2. Misunderstand the Demand of Market: To study carefully the market situation base on survey data of professional company.

3. Cost & revenue estimate is not match reality: To study the some similar project that successful before and collect good information from contractor.

4. Time schedule planning is not practice: To get the advisor of contractor and expert

5. Forecasting of cash flow is wrong: To break down detail a task base on general schedule and the selling program..

6. Mistake in term of FS calculation technical: Competency people should be in charge with the professional software. 

7. Lack of information in term of information of land: Good connection to authority.

8. Based on above study we can understand deeply a significant element which impacts the consequence of project.

The literature review also gives us the typical Feasibility study Framework for apartment project. It is comprised of 6 phases: Identify Conceptual, input data, estimate method application, method of evaluation, identify requirement, and identify benefit. In the initial step of FS framework, the preparation work is most important .This section conducts entire of data for FS processing to ensure the result is truth .In the processing step of FS framework, the method of estimate, evaluation demonstrate the feasible project. There are many tools to measure the benefit of project and specify the good decision –making in apartment investment.

The emphasize point in theory of FS is cost estimation method and cost estimation element. These method are Functional unit method, superficial method, element cost plan, approximate quantities techniques, and all of them can be implemented in real apartment project efficiently. The cost estimation elements describe the detail of some important figure such as: cost of land, cost of legal and professional fee in acquiring the land, construction cost, cost associated with facilities management, and cost of finance. Because Cost is the input data for FS processing, thus knowledge to understand it is critically studied in this report.

The case study of CARINA PLAZA is discussed based on the FS framework. The comparison between actual and theory demonstrate the investor to implement feasibility study framework relevant theory. With the actual project had just finished we can get experience relate to FS problem.

 

Recommendations

According the case study analysis, some problem occurring in feasibility study for apartment project was identified. In other hand, the cause is also revealed base on the comparison between actual and theory.

In order to improve the Feasibility Study of Apartment Project , the existing problem should be avoided such as increasing cost of land , high inflation , revenue changing , and fluctuation of material.

The method of cost estimation should be implemented properly and appropriately to ensure its accuracy as much as possible. Particularly the knowledge of construction industry is most important factor to implement result of project. Cash flow control is under-taken by people who have enough experience in construction work.

To get the information is concentrated highly to eliminate the risk in future stage. The revenue of project to be executed following the real market. Beside, the input data and the output data, the calculation technique should be carried out carefully and checking by many people involving to make-sure decision making is good.

The leader should support the team to carry out the FS by the information from other party such as: Marketing research, contactor, consultant, designing company and some expertise. Especially in Vietnam the Policy of Government is not stable that is why the good relationship with government is the most important point in feasibility study.

Conclusion, in order to achieve the feasibility study in apartment project the people conducting should be a integrated knowledge competence in term of construction industry, financing, marketing , politic, and selling.

         

Abstract

Vietnam is the developing country which is booming economic and the new medium classification increasing rapidly. The movement of people from rural region to urban region is grow up every year. The population growing is 2% a year that is compressing of Housing Supply for social need. The entire above figure is good reason for real estate business in Vietnam. However in order to success in property business the Feasibility study stage is most important factor should be consideration.

The subject of this study is analysis the method & effectiveness of feasibility study in Apartment Project. Base on theory and actual project the problem statement occurring in FS will be identified such as: Incorrect assumption , misunderstand the Demand of Market, cost & revenue estimate is not match reality, time schedule planning is not practice, forecasting of cash flow is wrong, mistake in term of FS calculation technical, lack of information in term of information of land. According the literature review the object study is summarized as Framework of FS in Apartment Project. To study the application of the framework in project case. To find the problem in FS for Apartment Project .To proposal the solution base on theory.

With the real project Carina Plaza the analyze of the comparison between theory and the actual activity is show up the different and causing of it. The method of cost estimate is concentrate to study according the theory and project case. The revenue estimate is also access careful to ensure the catch flow management always is positive and project is archive.

The final report specifies the most important factor to impact the FS and a successful of project in medium apartment. The FS should be conducted by the people who are integrate knowledge such as: construction knowledge, financing, marketing, communication.  

Seminar: Strategic Infrastructure Development of South East Asia

PROJECT FINAL EXAMINATION

MPM HO CHI MINH CITY - INTAKE 2012

16th - 23th November 2013

MPM program successfully organized Project Final examination for MPM students at AITVN in Ho Chi Minh city, Ha Noi and Can Tho city from 16-23 Nov 2013. Committee members were Dr. Hadikusumo, Dr. Chotchai, Dr. Santi and Dr. Santoso.

Students who have passed this exam and fulfilled all graduation requirements will attend the Graduation ceremony at AIT Thailand on 17 December 2013.

 

Final report presentation in Ho Chi Minh city

Final report presentation in Ha Noi

Final report presentation in Ha Noi

Owner’s Project Life Cycle Approach

In recent years, VRC has invested big amount capital for expanding rubber plantations and upgrading rubber processing facilities both domestic and outside the country. VRC has been carrying many rubber plantation projects in Cambodia, Laos and has been negotiating with Myanmar government. For VRC, the concept and practice of owner’s project life cycle have been used in rubber plantation projects. Nevertheless, VRC has not built a type of project life cycle appropriating with its specific characteristics; therefore, some projects meet with serious difficulties during performance. Although Cambodia projects are now just in middle of project life cycle but many problems happened like the costs balloon out of control, the scope expands beyond reason, the project slips behind schedule, and the deliverables do not possess expected value in Cambodia projects.

According to internal audit and the report of situation of the project management in construction of VRC in the period of 2007-2010, it shows many problems happening with VRC’s oversea rubber projects, especially cost and schedule. The problems, according to reports that VRC’s projects encounter as follows:

-          Cost overrunning or over budget;

-          Projects are prone to delay;

-          Project quality uncontrolled;

-          Project scope creep.

Also according to this report, VRC recognize the bad results in Cambodia are created by many reasons; however, poor management of the project life cycle is one of the reasons brings about serious consequences including the followings:

-          No establishing a framework of project life cycle;

-          Project proposals and business cases and project selecting process in the first phase were carried out incautiously have impacted to all remain phases of the project life cycle;

-          Some projects do not have a strong project management team;

-   Inadequate delegation from VRC’s head quarter and the project organization is not properly;

-          Lack of managerial skills and competencies as well as the internal capacities of the owner

VRC consider that the result of poor management of the project life cycle is one of the causes impact to the projects negatively. They are the critical problems which VRC and other related parties to Cambodia projects need to consider cautiously.

Do Huu Phuoc made a case study to study Vietnam Rubber Company’s project life cycle approach, analyze situation and develop a framework of project life cycle of a rubber plantation project and guideline to possibly ensure the projects deliver on time, on budget and to the level of quality expected.

Conclusion for VRC’s project life cycle approach

There is no single best approach in organizing project management throughout a project's life cycle. All organizational approaches have advantages and disadvantages, depending on the knowledge of the owner in project management as well as the type, size and location of the project. It is important for VRC to be aware of the approach which is most appropriate and beneficial for a particular project. In making choices, VRC should be concerned with the life cycle costs of planted rubber trees, constructed facilities rather than simply the initial costs.

Saving small amounts of money during construction may not be worthwhile if the result is much larger operating costs or not meeting the functional requirements for the new facility satisfactorily or the objective is not align with the scope. Thus, generally a project or particularly a rubber plantation project wants to finish successfully it must be very concerned all the phase of the project life cycle.

Recommendations

With so many ongoing projects like situation at present, VRC may encounter difficult for all projects to get adequate support, or even the attention of top managements. The particularly common problems when trying to manage multiple projects concurrently may be:

a.    There is no time for summary experience lessons so the mistakes from a project can repeat to all projects.

b.   Delays in one project may drag other projects delay because of common resource needs or technological dependencies;

c.  The inefficient use of corporate resources results in hills and valleys of resource utilization;

d.   There are unwholesome competitions between project teams to get support, or the attention of top managements;

VRC should consider a temporary stopping with the current projects to review all the problems happening. The lessons learn from projects should be analyzed, critiqued and documented for later use by the future projects and any other projects will be performed by VRC in Cambodia or other countries in the future. 

This study has concentrated on owner’s approach in managing project life cycle to an agriculture project. However, there are many aspects relating to the project management. Further studies should be carried out to find out the approach of owner for agriculture project management.

Abstract

 Project life cycle is an approach that links the phases, which can lead to significant results required for completing a project. As the owner has the most authority in enforcing the implementation of constructability, the owners' awareness of the benefit of the project life cycle is the most important. Project owners must be aware that the decisions that are made in the stages of projects are difficult and costly to change once construction begins.

Owners should recognize that there is no single best approach in organizing project management throughout a project's life cycle. All organizational approaches have advantages and disadvantages, depending on the knowledge of the owner in project management as well as the type, size and location of the project. It is important for the owner to be aware of the approach which is most appropriate and beneficial for a particular project. In making choices, owners should be concerned with the life cycle costs of constructed facilities rather than simply the initial construction costs. Saving small amounts of money during construction may not be worthwhile if the result is much larger operating costs or not meeting the functional requirements for the new facility satisfactorily.

However, the traditional approach to project life cycle limits their option for involving in the phases of the project. The general lifecycle model that an organization use will probably be similar to one that has been used dozens or hundreds of times at other organizations. There is no reason to reinvent everything for your own project. It just takes longer and contains more inherent risk. The better approach is to utilize a standard set of lifecycle processes, techniques and templates which to be used in the same industry.  

Planning for Improving Efficiency of Housing Project’s Development Process

According to the Governmental Investment Project Assessment Report for the year 2009 by Ho Chi Minh City People’s Committee, there are 1,177 projects completed until end of the year 2009 (which are currently equal to 20% of 5,886 operational projects in Ho Chi Minh City). However, 65% of the projects were delayed and 20 projects only achieved up to 30% of the target progress. This is due to the following reasons:

(i) Weak financial capacity of the project owners.

(ii) Lack of experienced project managers and project management human resources.

(iii) Long period for authority submission and lack of transparency of Vietnam law and regulations.

(iv) Land clearance and resettlement.

Bui Quang Huy made a case study which main objective is to investigate the basic requirements by Vietnam law and regulations, the common practice of housing development projects in Vietnam complying with Vietnam law and regulations; and to find out a more efficient process for developing a housing project in Vietnam.

Conclusions

The housing development industry has its own characteristics. Every single activity in the project development process has to comply with local law and regulations. Hence, the good understanding about local law and regulations is very useful for developers in their business. The success of the case project in this study also depends very much on the understanding about local law and regulations beside the project management knowledge.   

The old practice of housing project development process complying with Vietnam law and regulation is not efficient, it takes 60 – 78 months to finish the project from the feasibility study and planning phase to handing over and obtaining the ownerships for the house buyers. The longer the project development period is, the more costly the investment in housing projects is. Besides, Vietnam population and housing demand are developing very fast; the supply could not satisfy the demand. Hence, the housing price could not be reduced and a major part of people with low and medium income do not afford to buy houses. It causes a lot of social issues in Vietnam.

With the improved housing development process proposed, it takes 45 – 57 months to finish the project. If we only consider the Project Launching Preparation phase, the saving is 15 – 21months, it takes 12 -15 months in the improved process instead of 27 - 36 months of the old process. This is a valuable improvement. The investment in housing project becomes more efficient when the developers can recycle their investment faster and cut down financial cost in housing projects. It helps to increase the supply of housing products and reduce house price.

Besides the understanding about Vietnam market, the knowledge from lean production and last planner theory also offers a basis for evaluating the whole development process of housing projects and identify waste times in the process. The project manager/ planner should examine and schedule the project with all constituent and continuous activities as a whole. By implement that, it will make the timing of whole project period more efficient, rather than only taking care of shortening the period of its individual activities. The application of lean theory is absolutely suitable for the current situation of Vietnam housing market. It helps to shorten the project development period and make the process more efficient by ignoring waste time. There are no additional costs to apply these theories.

Recommendations

In general, when the understanding about local law and regulations is very important in housing project development, the developers should continuously update and study local law and regulations, especially, the new issuances.

A good relationship with government also helps developers in their submission works. This relationship could be created by contributing to society and maintaining the good image in the local market, the developers should properly deliver what they committed to the government and buyers.

The developers are recommended to maintain their efforts in evaluating the working and project development process to find any problems for improvement, not only waste of time, but also any other wastes such as cost, manpower, etc.

Lastly, the good schedule should never achieve the good actual result if it is not well controlled. The control system also needs to be established to monitor the execution of the project to ensure it is carried out in accordance with the plan.

ABSTRACT

Vietnam is a developing country which means that the country need a lot of knowledge for development, especially in the field of construction project management.

Some “old men” think that all the construction projects are similar, about the process, technology and method, especially housing development projects. They are actually not similar, there are many projects carried out in such a way of wasting time and cost; and achieving bad quality.

In this study, a more efficient process for housing development project is introduced. Hopefully, it could help the project managers / planners schedule and execute their projects strictly complying with the local law and regulations, in shorter cycle without any additional costs for advanced technology and materials.

This study also affirms that there is always un-efficiency in project development process of every construction projects. The project managers should always spend enough efforts to identify wastes and improve them. This is helping the projects, the company and the country, in a wider angle of view.

Engineering, Procurement, Construction (EPC) Contract Management

Engineering, Procurement, Construction, Pre-commissioning, Commissioning for the well, wellhead platforms, offshore facilities are considered to be very risky because of their complications and large money required, therefore we need good contract management to check whether the obligations, rights, specification, performance, commitment and so on are met properly and to optimize contract performance, eliminate risk involved in EPC contract throughout the lifecycle.

Not having a good contract management process in place has consequences both to the Client and the Contractor as well as to Consultant Company, Vendor, and Sub-contractor (if applicable). If the Contract Management is not managed, controlled, monitored, and implemented properly, the parties are likely to fail to meet its goals that they had for the project associated with the contract. Such failures may include delayed schedule, cost overruns, quality, safety and more.

EPC contracts have been used in both medium and complicated large scale oil and gas projects in Vietnam since 1990s. Phan Tuong Liem made a research by studying EPC Contract Management of his own project (Rang Dong Full Field Development Project Block 15.2 Offshore Vietnam). The objectives of his study were to:

1. study implementation of JVPC EPC contract management.

2. state problems that occurred in the execution of EPC project.

3. give out some recommendations to EPC contracts.

4. learn lessons from JVPC project.

Conclusion

In order to have a successful project, contract management played an important role. During the administration of a project, any major or minor activities involved a sequence of activities that were covered by different Clauses and Sub-clauses in the Contract.  However, in reality not all Clauses/Sub-clauses covered all activities without unchanged, unrevised. Because of modification and design change which were not fully mentioned in the Contract, as well as cost of extra work and so on.

The contract usually had at least three copies to be distributed: original copy for The Client, Contractor and filed Field Contract Manager to follow.

To mange well the contract, the Owner had enough qualified manpower to take care for each particular part and or area  of the project such as Supervisor, Superintendent, QA/QC Engineer, Cost Control Engineer, Scheduling Engineer, Administrator, Coordinator and so on who are involved in the project. The Project Manager himself could not take care the whole contract management.

Contractor knew how to allocate manpower, material, and equipment to meet the project target. Any personnel involve in the project especially key personnel had their profiles to show that they were qualified, competent and approved by the Client.

Abstract

Contract Management is the process that enables both parties to a contract to meet their rights, duties, obligations and responsibilities (i.e. allocate the risks) in order to deliver the objectives, services, required from the contract.

It also involves building a good working relationship between the customer and provider in general, and between Owner and Main Contractor or Main Contractor and Subcontractor so on. It continues throughout the life of a contract and involves managing proactively to anticipate future needs as well as reacting to situations that arise.

The main purpose of contract management is to obtain the services, performance, commitments as agreed in the contract between the Client and the Contractor. This means optimizing the efficiency, effectiveness and economy of the service, the performance, or relationship described in the contract, balancing costs against risks and actively managing the Clients/Owners and the Contractors relationship. Contract management may also aim for continuous improvement in performance over the life of the contract. 

Investment Risk Factors in Foreign Oil and Gas Investment Projects.

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