The increase in housing demand and the high cost of land in big cities in Vietnam such as Hanoi and Ho Chi Minh create a huge market for high-rise housing projects. However, development of these housing projects face many obstacles such as low income, high inflation, high bank interest rate, high land price, increasing construction materials and labor cost. In addition, the long project development period due to lack of transparency in local regulations and authority submission procedure also makes the investment projects less efficient. It requires the project managers / project planners having a good understanding on Vietnam law and regulations, and good planning skills to improve the development process of housing projects.
According to the 2009 Governmental Investment Project Assessment Report by Ho Chi Minh City People’s Committee, there are 1,177 projects completed until the 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 only 20 projects achieved the 30% target progress. The obvious reasons for these are:
1. Weak financial capacity of the project owners.
2. Lack of experienced project managers and project management human resources.
3. Long period for authority submission and lack of transparency of Vietnam law and regulations.
4. Land clearance and resettlement
Mr. Bui Quang Huy made a study 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 greatly depends 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. 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 cannot 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, 15 – 21months would be saved, then 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 implementing 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.
His thesis abstract is copied and posted.
Abstract
Vietnam is a developing country, it 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 inefficiency 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.
Tuesday 18 January 2011
Monday 17 January 2011
Project Management Practice in Small and Medium Vietnamese Contractor: A Case Study of Nhat Dang Company
In the last ten years, Viet Nam economy is one of the fastest growing economies in the world. Along with this economic development is the boosts in construction industry which mostly involve are small and medium construction enterprise. These SMEs are comprised of small number of employees and have limited total assets. According to Vietnam’s Decree 56/2009/NĐ-CP, SMEs are divided into three levels based on the total assets and number of employees such as:
- Micro enterprises: under 10 employees.
- Small enterprises: total assets are under 20 billion VND and number of employees is from 10 to 200 peoples.
- Medium enterprises: total assets are from 20 to 100 billion VND and number of employees is from 200 to 300 peoples.
With limited financial and human resources, SME contractors are unable to win big projects or operate many projects at the same time. SMEs also easily encounter cash shortage problem. According to Ling et al. (2009), one of the weaknesses of Vietnamese contractors is lack of project management ability. Almost all performed projects in Vietnam encountered delay, low quality or cost overrun due to low project management capability of the owners and contactors. Most SMEs are founded by an engineer or architect, who had worked for a bigger company and who is well-experienced in construction but not in management. With limited financial capacity, SMEs cannot hire good project manager resulting to poor project management capability.
The requirement of strong project management ability is becoming more essential for Vietnamese SME contractors since more projects have participation of foreign owners, consultants or main contractors, where requirement of schedule and quality performance are very strict. But how could SME contractors do it effectively with limited resources is still a question.
Mr. Vo Dinh Nguyen made a project study which objectives were to: (1) investigate project management functions of a small construction company; (2) identify strengths and weaknesses of project management of the company; and (3) propose recommendations for improvement of project management functions in small construction company.
Conclusion
By reviewing related theory of project management and analyzing the operation practice of Nhat Dang Company, the strengths and weaknesses of the company in certain areas of project management are summarized in table below.
Project management is not just limited in these aspects and to have a more general view of company management capability; other areas of project management knowledge should also be studied. These include:
- Project scope management;
- Project human resource management;
- Project communications management; and
- Project integration management.
Base on identified strengths and weaknesses, the case study proposed solutions to improve project management competency of the company in studied areas. Some solutions that require more resources should be planned to apply when the management capability reach a higher level. They may be useful for some Vietnamese SME contractors which are in the same situation but may be unsuitable for others. Some essential solutions that the company needs to achieve to ensure their operations are:
- Full utilization of earned value technique for better schedule and cost control.
- Develop an advance resource requirement plan for each project.
- Establish the project spending plan and funding requirement and follow the plan in operation.
- Carry out the project risk management process.
- Enhance the role of the project team.
Another weakness that the company management has is the lack of measuring, recording and analyzing the results of management processes for improvement. A useful model for continuous improvement is the Plan – Do - Check – Act cycle as show in figure below.
Plan : Define the goal and processes to achieve it
Do : Implement processes
Check : Measure the process and results against defined values to find out variations.
Act : Analyze variations and determine necessary actions to improve future operations.
This model is helpful and can be applied in any process of management, any organization for improving management competence.
His abstract is copied and posted.
Abstract
Project management plays a very important role in the management of construction enterprises. Although being the major element in Vietnam construction industry, most of Vietnamese SME contractors are still weak in project management capability. Improving project management capabilities are essential needs for survival and development of SME contractors.
This report reviews theory of project management in areas of time, cost, quality, procurement and risk management. Necessary processes and knowledge for those project management functions are identified and analyzed.
By analyzing past performance and practice of project management in Nhat Dang construction company, a typical SME contractor in Ho Chi Minh City, the report point out strengths and weaknesses in project management of the company. Necessary solutions for improvements of project management functions are proposed. These solutions can be applied to similar small construction companies either.
- Micro enterprises: under 10 employees.
- Small enterprises: total assets are under 20 billion VND and number of employees is from 10 to 200 peoples.
- Medium enterprises: total assets are from 20 to 100 billion VND and number of employees is from 200 to 300 peoples.
With limited financial and human resources, SME contractors are unable to win big projects or operate many projects at the same time. SMEs also easily encounter cash shortage problem. According to Ling et al. (2009), one of the weaknesses of Vietnamese contractors is lack of project management ability. Almost all performed projects in Vietnam encountered delay, low quality or cost overrun due to low project management capability of the owners and contactors. Most SMEs are founded by an engineer or architect, who had worked for a bigger company and who is well-experienced in construction but not in management. With limited financial capacity, SMEs cannot hire good project manager resulting to poor project management capability.
The requirement of strong project management ability is becoming more essential for Vietnamese SME contractors since more projects have participation of foreign owners, consultants or main contractors, where requirement of schedule and quality performance are very strict. But how could SME contractors do it effectively with limited resources is still a question.
Mr. Vo Dinh Nguyen made a project study which objectives were to: (1) investigate project management functions of a small construction company; (2) identify strengths and weaknesses of project management of the company; and (3) propose recommendations for improvement of project management functions in small construction company.
Conclusion
By reviewing related theory of project management and analyzing the operation practice of Nhat Dang Company, the strengths and weaknesses of the company in certain areas of project management are summarized in table below.
Project management is not just limited in these aspects and to have a more general view of company management capability; other areas of project management knowledge should also be studied. These include:
- Project scope management;
- Project human resource management;
- Project communications management; and
- Project integration management.
Base on identified strengths and weaknesses, the case study proposed solutions to improve project management competency of the company in studied areas. Some solutions that require more resources should be planned to apply when the management capability reach a higher level. They may be useful for some Vietnamese SME contractors which are in the same situation but may be unsuitable for others. Some essential solutions that the company needs to achieve to ensure their operations are:
- Full utilization of earned value technique for better schedule and cost control.
- Develop an advance resource requirement plan for each project.
- Establish the project spending plan and funding requirement and follow the plan in operation.
- Carry out the project risk management process.
- Enhance the role of the project team.
Another weakness that the company management has is the lack of measuring, recording and analyzing the results of management processes for improvement. A useful model for continuous improvement is the Plan – Do - Check – Act cycle as show in figure below.
Plan : Define the goal and processes to achieve it
Do : Implement processes
Check : Measure the process and results against defined values to find out variations.
Act : Analyze variations and determine necessary actions to improve future operations.
This model is helpful and can be applied in any process of management, any organization for improving management competence.
His abstract is copied and posted.
Abstract
Project management plays a very important role in the management of construction enterprises. Although being the major element in Vietnam construction industry, most of Vietnamese SME contractors are still weak in project management capability. Improving project management capabilities are essential needs for survival and development of SME contractors.
This report reviews theory of project management in areas of time, cost, quality, procurement and risk management. Necessary processes and knowledge for those project management functions are identified and analyzed.
By analyzing past performance and practice of project management in Nhat Dang construction company, a typical SME contractor in Ho Chi Minh City, the report point out strengths and weaknesses in project management of the company. Necessary solutions for improvements of project management functions are proposed. These solutions can be applied to similar small construction companies either.
Friday 14 January 2011
Minimizing Impact of Change Order to Projects Cost
Contract Management is a vast scope particularly in construction industry wherein a single contract normally finishes from months to years. Managing a contract in any construction project is a tedious task. All pertinent documents must be monitored, diligently recorded and filed before, during and after construction. Changes in construction as we know are inevitable but can be properly managed and controlled. Deviation from the contract, often called change order or variation order are changes brought about by the owner or changes due to site conditions, damages or weather. These changes may not directly affect the contract in terms of time and cost, but both parties must be knowledgeable as to how to control and protect the owner and contractor from any changes necessary in the construction and implementation of the project. In order to manage such changes or variation orders, proper guidelines must be followed.
Knowing and carefully reviewing the contract, following the proper variation procedure and constantly taking in to consideration the risks that may bring about if poor records of everyday activities particularly on change orders would be taxing if the Contractor claims.
Ms. Chona S. Salvahan made a study which objectives were to: (1) identify changes occurring in a residential apartment project. Identify the type, causation and resolution; and (2) identify proper procedure, develop methodology and documentation to control and manage variation or change orders. Identifying the type of change order will help formulate a procedure adapt to the variation.
Conclusion
Based on the case study, the residential apartment project garnered change order that were classified into five (5) categories such as:
1. Addendums – included additional packages outside the scope of the original contract and are entirely different work but necessary for the project.
2. Price Fluctuation – included price adjustments to construction materials used on site specifically on concrete, reinforcement bars, sand and cement used for structural works on site.
3. Variation due to Design Change – these changes may have resulted from design revisions, defects in drawings or contract documents and differing site conditions grouped into main building works and external works package.
4. Damages – were from re-works items or damages due to negligence of other contractors and sub-contractors.
5. Deductions or Omission – included items that were not installed on site and items that were cancelled and were redundant to the design
Variations that were considered under Extra Work are the three (3) Addendums to the contract. While variations directly requested by the Owner to improve serviceability and aesthetic of the building are considered Additional works. One example is the supply and installation aluminum louver to cover the condensing unit of air-conditioning in every apartment. This additional work is considered Directed Change because the instruction to change or add is from the project owner. Other variations resulted from factor that influence the change were considered constructive change as well as Price Fluctuation, Damages and Omissions were all under different situations during implementation of the project.
Factors that contributed to the change were clearly specified in this study. These events in the construction that caused changes generated even before the main building works started. Continuing to the construction, another set of variations emerge during implementation. At this stage, causes may have been different from the causes during the pre-construction stage. Towards completion of the project, changes still occur, seeing the defects and the need to add or enhance serviceability of the development. Current procedure is useful but can be developed to improve processing period and administer each changes lessening the probable effect to the whole project particularly on the cost.
Below are the suggested stages of processing procedure for better time table of change order settlement:
Validation – where entitlement is agreed and analyzing the effect of the change to project cost and schedule.
1. Evaluation – verifying and gathering data to substantiate the claim. It is also the time of determining the true cost of the variation order thru investigation, review of quantities and considerations in estimates. It is also at this time that both parties should concur and agree on quantity, measurement and total cost in order to save time and will only proceed to the next whenever disagreement on cost arises.
2. Negotiation – only and only if both parties cannot arrive into agreement on price, quantities, measurement or methods should resort to this step where the top management is involve in order settling amicably.
3. Final Approval – time when both parties are satisfied with the evaluation, change order is prepared for final documentation and approval.
Special concerns have to be met particularly of this project. Many of the units have already been sold and were committed to deliver to the tenant on specific dates. The project has no luxury of extending the time thru which in trying to satisfy the commitment of the Owner, the construction restrained the project from achieving a more quality and a more organized method in implementing the project. Change order management helped control the changes incurred during construction but not totally eliminate the potential changes. It may prevent these changes to accumulate and later when accumulated can become a bigger claim for the contractor which is more tedious, complicated and time consuming task to process.
Furthermore, prior to implementation and part of Change Order Management is the adding change clause in the contract, formulating variation procedure and setting or allocating time for settlement process. The deliberate inclusion of change clause is similarly important to control probable change order in a construction project. As observed, the other 3 main sources of change on site were the following:
Differing site conditions resulted from defects in the construction of substructure. The previously installed piles were displaced and because of this the foundation design has to be checked and revised. The owner was compelled to review and revise if necessary the whole structural building.
Defects in contract documents where a number of items were not in the drawings or specification but necessary to install or construct on site.
Owner direction or instructions where the rest of the variations were directed by the owner either thru modification of design drawings or changes had to be added for aesthetic reasons. A lot of variations were requested by the owner or unit buyers.
Recommendation
In order to manage Change Order, both parties should identify their right to vary, the Owner right to include change clause to protect their benefit. These change clauses must be anticipated during planning and before composition of the contract. Therefore a meticulous study of the drawings, site conditions and other factors that may affect arise change in the contract and construction. Clear definition of scope of work would minimize the risk of misinterpretation and misjudgment of the work. In a way, changes would be avoided and if items were not included in the contract, it can be easily identified and agreed on. More so, clear distinction of the methods and procedure to use in claiming variations and the authority issuing the VO. This will clearly guide the contractor on how, what and who to talk to in case a change would occur.
Her thesis abstract is copied and posted.
Abstract
Construction industry is often described as a volatile industry which can be true in implementing a project. Construction itself is more often unpredictable due to the different situations a project may face. Changes may occur in the preparation, during construction and even upon completion of the project. The veracity of inconsistent nature of construction, change management procedures must be considered to minimize the effects particularly to project cost, time schedule and overall quality of the project.
Recently, the high turn in of foreign investors and Vietnamese nationals living abroad inspired a number of Developers to venture in High End Apartments. The big challenge for the Vietnam Construction industry is to advance the management styles to cope up with challenges faced in a project. Procedures in managing contract and change orders are viewed to know the effectiveness and liability ensuing steps observed. Disruptions in cash flow and programme when mitigated and handled correctly may create confidence in handling changes that transpire in any project.
However, knowledge and skill in managing this challenging changes and observing effective procedures may eventually create a norm in Project Management system in the industry where tradition of strong relationship among Owner and Contract still prevails.
Knowing and carefully reviewing the contract, following the proper variation procedure and constantly taking in to consideration the risks that may bring about if poor records of everyday activities particularly on change orders would be taxing if the Contractor claims.
Ms. Chona S. Salvahan made a study which objectives were to: (1) identify changes occurring in a residential apartment project. Identify the type, causation and resolution; and (2) identify proper procedure, develop methodology and documentation to control and manage variation or change orders. Identifying the type of change order will help formulate a procedure adapt to the variation.
Conclusion
Based on the case study, the residential apartment project garnered change order that were classified into five (5) categories such as:
1. Addendums – included additional packages outside the scope of the original contract and are entirely different work but necessary for the project.
2. Price Fluctuation – included price adjustments to construction materials used on site specifically on concrete, reinforcement bars, sand and cement used for structural works on site.
3. Variation due to Design Change – these changes may have resulted from design revisions, defects in drawings or contract documents and differing site conditions grouped into main building works and external works package.
4. Damages – were from re-works items or damages due to negligence of other contractors and sub-contractors.
5. Deductions or Omission – included items that were not installed on site and items that were cancelled and were redundant to the design
Variations that were considered under Extra Work are the three (3) Addendums to the contract. While variations directly requested by the Owner to improve serviceability and aesthetic of the building are considered Additional works. One example is the supply and installation aluminum louver to cover the condensing unit of air-conditioning in every apartment. This additional work is considered Directed Change because the instruction to change or add is from the project owner. Other variations resulted from factor that influence the change were considered constructive change as well as Price Fluctuation, Damages and Omissions were all under different situations during implementation of the project.
Factors that contributed to the change were clearly specified in this study. These events in the construction that caused changes generated even before the main building works started. Continuing to the construction, another set of variations emerge during implementation. At this stage, causes may have been different from the causes during the pre-construction stage. Towards completion of the project, changes still occur, seeing the defects and the need to add or enhance serviceability of the development. Current procedure is useful but can be developed to improve processing period and administer each changes lessening the probable effect to the whole project particularly on the cost.
Below are the suggested stages of processing procedure for better time table of change order settlement:
Validation – where entitlement is agreed and analyzing the effect of the change to project cost and schedule.
1. Evaluation – verifying and gathering data to substantiate the claim. It is also the time of determining the true cost of the variation order thru investigation, review of quantities and considerations in estimates. It is also at this time that both parties should concur and agree on quantity, measurement and total cost in order to save time and will only proceed to the next whenever disagreement on cost arises.
2. Negotiation – only and only if both parties cannot arrive into agreement on price, quantities, measurement or methods should resort to this step where the top management is involve in order settling amicably.
3. Final Approval – time when both parties are satisfied with the evaluation, change order is prepared for final documentation and approval.
Special concerns have to be met particularly of this project. Many of the units have already been sold and were committed to deliver to the tenant on specific dates. The project has no luxury of extending the time thru which in trying to satisfy the commitment of the Owner, the construction restrained the project from achieving a more quality and a more organized method in implementing the project. Change order management helped control the changes incurred during construction but not totally eliminate the potential changes. It may prevent these changes to accumulate and later when accumulated can become a bigger claim for the contractor which is more tedious, complicated and time consuming task to process.
Furthermore, prior to implementation and part of Change Order Management is the adding change clause in the contract, formulating variation procedure and setting or allocating time for settlement process. The deliberate inclusion of change clause is similarly important to control probable change order in a construction project. As observed, the other 3 main sources of change on site were the following:
Differing site conditions resulted from defects in the construction of substructure. The previously installed piles were displaced and because of this the foundation design has to be checked and revised. The owner was compelled to review and revise if necessary the whole structural building.
Defects in contract documents where a number of items were not in the drawings or specification but necessary to install or construct on site.
Owner direction or instructions where the rest of the variations were directed by the owner either thru modification of design drawings or changes had to be added for aesthetic reasons. A lot of variations were requested by the owner or unit buyers.
Recommendation
In order to manage Change Order, both parties should identify their right to vary, the Owner right to include change clause to protect their benefit. These change clauses must be anticipated during planning and before composition of the contract. Therefore a meticulous study of the drawings, site conditions and other factors that may affect arise change in the contract and construction. Clear definition of scope of work would minimize the risk of misinterpretation and misjudgment of the work. In a way, changes would be avoided and if items were not included in the contract, it can be easily identified and agreed on. More so, clear distinction of the methods and procedure to use in claiming variations and the authority issuing the VO. This will clearly guide the contractor on how, what and who to talk to in case a change would occur.
Her thesis abstract is copied and posted.
Abstract
Construction industry is often described as a volatile industry which can be true in implementing a project. Construction itself is more often unpredictable due to the different situations a project may face. Changes may occur in the preparation, during construction and even upon completion of the project. The veracity of inconsistent nature of construction, change management procedures must be considered to minimize the effects particularly to project cost, time schedule and overall quality of the project.
Recently, the high turn in of foreign investors and Vietnamese nationals living abroad inspired a number of Developers to venture in High End Apartments. The big challenge for the Vietnam Construction industry is to advance the management styles to cope up with challenges faced in a project. Procedures in managing contract and change orders are viewed to know the effectiveness and liability ensuing steps observed. Disruptions in cash flow and programme when mitigated and handled correctly may create confidence in handling changes that transpire in any project.
However, knowledge and skill in managing this challenging changes and observing effective procedures may eventually create a norm in Project Management system in the industry where tradition of strong relationship among Owner and Contract still prevails.
Thursday 13 January 2011
Risk Management in PPP Expressway Project in Vietnam: Ha Noi – Hai Phong Expressway Project Case Study
The rapid growth of Vietnam’s economy over the past few years contributes a significant strain on the country’s physical infrastructure. With economic development expected to continue at a rapid pace, pressures on roads, ports and other infrastructure systems will increase. Vietnam’s underlying concern for the last 10 years is a failure to develop infrastructure, which is now become a bottleneck of economic growth.
In next ten years 2010 to 2020, demands for infrastructure investment will increase by 10%, But how the Vietnam government can mobilize such huge capital shortfall for infrastructure investment, while state budget deficit stands at high level for a very long time and the public debt is in high level and in fast increasing trend (the economist newspapers at http://www.economist.com). With these problems, Public-Private Partnerships (PPP) becomes the optimal solution to fill the shortfall of finance resource.
However, until now, there is still no legal concept of PPP or a separate law on PPP in Vietnam. The only current separated regulation for investment under BOT scheme (a kind of PPP model) is Circular No.108/ND-CP dated 27, November, 2009. The Vietnamese Government and relevant ministries recognize need to established PPP’s legal framework to raise capital from the private sector and from banks and credit institutions, regardless of whether they are under domestic or foreign. PPPs regulations, after one year of preparation by MPI and related ministries were issued on 15th November 2010 by Prime Minister.
Until now, there are only few researches have been conducted on risk management in PPP expressway project in Viet Nam. In order to help investors and policy makers to have a better perception on risk management in PPP expressway project in Vietnam, Mr. Vu Van Cao made a case study with the following objectives:
1. identify and assess the key risk in investment under PPP in Viet Nam;
2. how this key risk in investment under PPP in Vietnam are allocated in Ha Noi – Hai Phong expressway project through Project structure; and
3. recommendation for the Project Company to improve mitigation of critical Risk in Ha Noi – Hai Phong expresses way Project
Conclusion
Base on the results of analysis, it can be seen that risk allocation among related stakeholder is not so good and fair because Vietnamese government transfers all critical risks to Project Company and to road users which causes BOT project long period concession; and the Project Company have to take the financial burden leading to company bankruptcy.
Recommendations for Project Company (VIFIDI)
1. Establishing a specified team in charge to investigate the risks through BOT contract and to propose mitigation strategy;
2. Renegotiation with MOT on BOT contract provision on allocation of risks, which are assessed “cannot be accepted”;
3. Need to sharing risks, which are assessed “Accepted” with the third party;
4. Reevaluation of commercial viability of BOT project and recalculation of financial ratio of BOT project (ROE, NPV, and IRR) to reassess feasibility of the project; and
5. Propose to Government to give financial support to fund land acquisition and resettlement to reduce financial burden during construction period because (i) D/E ration level is too high 13.3) and can cause instability in financial situation when project comes into operation (recommended D/E ratio is 3 times following the PPP pilot regulations No. 71/2010/QD –TTg issued by Prime Minister on 9th November 2010); (ii) Concession period is too long (30.36 year) which causes long return for investors.
Recommendation for Ministry of Transportation (MOT) and GOV (Vietnam Government)
The Ha Noi – Hai Phong expressway is the first expressway project invested under BOT in Vietnam. The success of this project can be a good example to attract more private capital investment on expressway development under PPP model. Therefore, GOV and BOT must share the risks with project company and road user in order to help VIDIFI to implement the project successfully. Below are some recommendations for GOV and MOT to follow:
1. Most of the risks in Ha Noi – Hai Phong expressway project have been transferred to the road user and Project Company. It is proposed that the MOT and GOV fund to land acquisition and resettlement in order to reduce financial burden of Project Company and shorten the concession period;
2. GOV has to give Project company right to develop Land expressway to return their capital investment (profit from land development is expected 7.890 billion VND). Project Company needs more finance resources to fund land development project by itself. This causes unintentionally increasing financial burden on investors. Thus, instead of giving the Project Company the right to develop Land expressway to return capital investment, GOV should allow VIDIFI to increase toll rate of existing NHNo.5, and access to preferential loan with low interest rate and long payback period to reduce financial burden, shorten concession period and increasing feasibility of project.
Mr. Cao’s thesis abstract is copied and posted.
Abstract
Recent years in Vietnam, many Public Private Partnership (PPP) expressway projects have been being invested under PPP model. But the Risk management, which is critical factor of project success, is undervaluation by investors and policy maker. This project case study will contribute on increasing perception on risk management of the investors and policy makers in Vietnam. Project case study will indentify, classify and assess the risks in PPP expressway investment in Vietnam and specify the critical risks, for which the investors and policy makers must pay their attention. The investors and policy makers will understand how the above critical risks to be managed through case study of Ha Noi – Hai Phong expressway project. In the case study, the research will assess the risk allocation among three parties including investor (Project Company), public authorities and road users. The research will also propose recommendation for Project Company improving the risk management in case study.
In next ten years 2010 to 2020, demands for infrastructure investment will increase by 10%, But how the Vietnam government can mobilize such huge capital shortfall for infrastructure investment, while state budget deficit stands at high level for a very long time and the public debt is in high level and in fast increasing trend (the economist newspapers at http://www.economist.com). With these problems, Public-Private Partnerships (PPP) becomes the optimal solution to fill the shortfall of finance resource.
However, until now, there is still no legal concept of PPP or a separate law on PPP in Vietnam. The only current separated regulation for investment under BOT scheme (a kind of PPP model) is Circular No.108/ND-CP dated 27, November, 2009. The Vietnamese Government and relevant ministries recognize need to established PPP’s legal framework to raise capital from the private sector and from banks and credit institutions, regardless of whether they are under domestic or foreign. PPPs regulations, after one year of preparation by MPI and related ministries were issued on 15th November 2010 by Prime Minister.
Until now, there are only few researches have been conducted on risk management in PPP expressway project in Viet Nam. In order to help investors and policy makers to have a better perception on risk management in PPP expressway project in Vietnam, Mr. Vu Van Cao made a case study with the following objectives:
1. identify and assess the key risk in investment under PPP in Viet Nam;
2. how this key risk in investment under PPP in Vietnam are allocated in Ha Noi – Hai Phong expressway project through Project structure; and
3. recommendation for the Project Company to improve mitigation of critical Risk in Ha Noi – Hai Phong expresses way Project
Conclusion
Base on the results of analysis, it can be seen that risk allocation among related stakeholder is not so good and fair because Vietnamese government transfers all critical risks to Project Company and to road users which causes BOT project long period concession; and the Project Company have to take the financial burden leading to company bankruptcy.
Recommendations for Project Company (VIFIDI)
1. Establishing a specified team in charge to investigate the risks through BOT contract and to propose mitigation strategy;
2. Renegotiation with MOT on BOT contract provision on allocation of risks, which are assessed “cannot be accepted”;
3. Need to sharing risks, which are assessed “Accepted” with the third party;
4. Reevaluation of commercial viability of BOT project and recalculation of financial ratio of BOT project (ROE, NPV, and IRR) to reassess feasibility of the project; and
5. Propose to Government to give financial support to fund land acquisition and resettlement to reduce financial burden during construction period because (i) D/E ration level is too high 13.3) and can cause instability in financial situation when project comes into operation (recommended D/E ratio is 3 times following the PPP pilot regulations No. 71/2010/QD –TTg issued by Prime Minister on 9th November 2010); (ii) Concession period is too long (30.36 year) which causes long return for investors.
Recommendation for Ministry of Transportation (MOT) and GOV (Vietnam Government)
The Ha Noi – Hai Phong expressway is the first expressway project invested under BOT in Vietnam. The success of this project can be a good example to attract more private capital investment on expressway development under PPP model. Therefore, GOV and BOT must share the risks with project company and road user in order to help VIDIFI to implement the project successfully. Below are some recommendations for GOV and MOT to follow:
1. Most of the risks in Ha Noi – Hai Phong expressway project have been transferred to the road user and Project Company. It is proposed that the MOT and GOV fund to land acquisition and resettlement in order to reduce financial burden of Project Company and shorten the concession period;
2. GOV has to give Project company right to develop Land expressway to return their capital investment (profit from land development is expected 7.890 billion VND). Project Company needs more finance resources to fund land development project by itself. This causes unintentionally increasing financial burden on investors. Thus, instead of giving the Project Company the right to develop Land expressway to return capital investment, GOV should allow VIDIFI to increase toll rate of existing NHNo.5, and access to preferential loan with low interest rate and long payback period to reduce financial burden, shorten concession period and increasing feasibility of project.
Mr. Cao’s thesis abstract is copied and posted.
Abstract
Recent years in Vietnam, many Public Private Partnership (PPP) expressway projects have been being invested under PPP model. But the Risk management, which is critical factor of project success, is undervaluation by investors and policy maker. This project case study will contribute on increasing perception on risk management of the investors and policy makers in Vietnam. Project case study will indentify, classify and assess the risks in PPP expressway investment in Vietnam and specify the critical risks, for which the investors and policy makers must pay their attention. The investors and policy makers will understand how the above critical risks to be managed through case study of Ha Noi – Hai Phong expressway project. In the case study, the research will assess the risk allocation among three parties including investor (Project Company), public authorities and road users. The research will also propose recommendation for Project Company improving the risk management in case study.
Wednesday 12 January 2011
A Hybrid Stochastic/Mechanistic Model for Determining Bridge Condition Rating
Bridges like other infrastructures such as roads and dams require proper inspection and maintenance programs to reserve bridge structural integrity and to ensure public safety. The structural integrity decreases through time due to several factors such as material degradation, environmental attacks, and an increase in usage over time. The consequence of improper inspection and maintenance programs can cause catastrophic bridge failure.
Dr. Rajwanlop Kumpoopong made a research which focused on developing a hybrid deterioration model that combines the quantitative analysis of damage mechanisms and the stochastic process based on the concept of Markov chain. The proposed model enhances the existing Markov deterioration model in a more reliable condition prediction of bridge elements at the network-level since relevant variables which affect the deterioration of bridge elements are properly addressed. Only the hybrid deterioration model for bridge deck is developed in this research.
The main objective of this research was to develop the methodology for developing the hybrid deterioration model for bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management. The methodology is then applied to develop the hybrid deterioration model for bridge deck under truck traffic condition in Thailand as a case study. The secondary objectives of this research were to: (1) study the effect of each truck category on the deterioration of bridge deck; (2) study the effect of upgrading regulatory truck weights on the deterioration of bridge deck; and (3) study the effect of overloaded truck for the transportation of sugarcane on the deterioration of bridge deck.
Conclusions
Bridge deck is the major bridge component that requires significant maintenance effort. The factor that contributes most to the deterioration process of bridge decks is concrete cracking which is directly related to the traffic volume and can be accelerated by increasing truck traffic. Bridge deck deterioration models in most recent bridge management systems are expressed in the form of probabilistic deterioration models such as the Markovian process. The transition probability matrix is developed to capture the deterioration mechanism of bridge decks.
The strength of the Markov deterioration model is its practicality when it is applied to forecast at the network-level bridge management. The condition of the bridge deck over time can simply be predicted through the multiplications of the initial state vector and the transition probability matrix. However, the Markov deterioration model has some weaknesses since the model may not reflect the actual condition of bridge decks. In the Markov chain models, relevant variables which affect the deterioration process of bridge decks, such as changes in traffic volume and environmental conditions are assumed to be constant throughout the analysis period. This may not be realistic and can result in the overestimation or underestimation of the forecasted bridge condition.
This research work aims to develop the methodology for developing the hybrid deterioration model for reinforced concrete (RC) bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management.
In this research, the finite element program that can simulate cracks in RC bridge deck due to truck traffic is developed to capture the crack mechanism. The results are presented by S-N relations of RC bridge deck at different levels of damage. The damage is defined in this study as the extent of crack on the bottom surface of the deck slab or the crack level. Distribution curves of the number of trucks required for the crack to reach each crack level are then developed from the simulated S-N relations and the truck weight information. From these distribution curves and the specified truck traffic volume and composition, transition probabilities based on the concept of Markov chain can be calculated. Based on the proposed technique, transition probabilities can be calculated for truck traffic data that is non-homogeneous with respect to both composition and volume which provides the flexibility of the model to be applied to highway bridges of different truck traffic conditions. The effect of specific overloaded trucks on the deterioration of DOH bridge deck is discussed through the case study of the transportation of sugarcane. For practical assessment of the deterioration of DOH bridge deck, a series of distribution curves of the number of trucks required for the crack to reach different crack levels for different truck categories and gross weights is provided.
His dissertation abstract is copied and posted below.
ABSTRACT
The concept of Markov chain has been widely used to predict the condition of bridge deck. The transition probability matrices, which are mostly developed by inspection data and experts’ opinion, are used to capture the deterioration of bridge deck. The Markov deterioration model developed by this approach although states deterioration in probabilistic sense may not be reliable because relevant variables which affect the deterioration of bridge deck such as changes in traffic volume and environmental conditions are not explicitly emphasized in the model. Concrete cracking which can be accelerated by increased truck traffic is the factor that contributes most to the deterioration of bridge deck and should be addressed in the deterioration model. This research work aims to develop the methodology for developing the hybrid deterioration model for reinforced concrete (RC) bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management. In this research, the finite element program that can simulate cracks in RC bridge deck due to truck traffic is developed to capture the crack mechanism. The results are presented by S-N relations of RC bridge deck at different levels of damage. The damage is defined in this study as the extent of crack on the bottom surface of the deck slab or the crack level. Distribution curves of the number of trucks required for the crack to reach each crack level are then developed from the simulated S-N relations and the truck weight information. From these distribution curves and the specified truck traffic volume and composition, transition probabilities based on the concept of Markov chain can be calculated. Based on the proposed technique, transition probabilities can be calculated for truck traffic data that is non-homogeneous with respect to both composition and volume which provides the flexibility of the model to be applied to highway bridges of different truck traffic conditions. The methodology is presented through the development of hybrid deterioration model for Thailand Department of Highways (DOH) bridge deck. In the presentation, the effect of each truck category and the effect of upgrading regulatory truck weights on the deterioration of DOH bridge deck are discussed. The effect of specific overloaded trucks on the deterioration of DOH bridge deck is discussed through the case study of the transportation of sugarcane. For practical assessment of the deterioration of DOH bridge deck, a series of distribution curves of the number of trucks required for the crack to reach different crack levels for different truck categories and gross weights is provided.
Dr. Rajwanlop Kumpoopong made a research which focused on developing a hybrid deterioration model that combines the quantitative analysis of damage mechanisms and the stochastic process based on the concept of Markov chain. The proposed model enhances the existing Markov deterioration model in a more reliable condition prediction of bridge elements at the network-level since relevant variables which affect the deterioration of bridge elements are properly addressed. Only the hybrid deterioration model for bridge deck is developed in this research.
The main objective of this research was to develop the methodology for developing the hybrid deterioration model for bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management. The methodology is then applied to develop the hybrid deterioration model for bridge deck under truck traffic condition in Thailand as a case study. The secondary objectives of this research were to: (1) study the effect of each truck category on the deterioration of bridge deck; (2) study the effect of upgrading regulatory truck weights on the deterioration of bridge deck; and (3) study the effect of overloaded truck for the transportation of sugarcane on the deterioration of bridge deck.
Conclusions
Bridge deck is the major bridge component that requires significant maintenance effort. The factor that contributes most to the deterioration process of bridge decks is concrete cracking which is directly related to the traffic volume and can be accelerated by increasing truck traffic. Bridge deck deterioration models in most recent bridge management systems are expressed in the form of probabilistic deterioration models such as the Markovian process. The transition probability matrix is developed to capture the deterioration mechanism of bridge decks.
The strength of the Markov deterioration model is its practicality when it is applied to forecast at the network-level bridge management. The condition of the bridge deck over time can simply be predicted through the multiplications of the initial state vector and the transition probability matrix. However, the Markov deterioration model has some weaknesses since the model may not reflect the actual condition of bridge decks. In the Markov chain models, relevant variables which affect the deterioration process of bridge decks, such as changes in traffic volume and environmental conditions are assumed to be constant throughout the analysis period. This may not be realistic and can result in the overestimation or underestimation of the forecasted bridge condition.
This research work aims to develop the methodology for developing the hybrid deterioration model for reinforced concrete (RC) bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management.
In this research, the finite element program that can simulate cracks in RC bridge deck due to truck traffic is developed to capture the crack mechanism. The results are presented by S-N relations of RC bridge deck at different levels of damage. The damage is defined in this study as the extent of crack on the bottom surface of the deck slab or the crack level. Distribution curves of the number of trucks required for the crack to reach each crack level are then developed from the simulated S-N relations and the truck weight information. From these distribution curves and the specified truck traffic volume and composition, transition probabilities based on the concept of Markov chain can be calculated. Based on the proposed technique, transition probabilities can be calculated for truck traffic data that is non-homogeneous with respect to both composition and volume which provides the flexibility of the model to be applied to highway bridges of different truck traffic conditions. The effect of specific overloaded trucks on the deterioration of DOH bridge deck is discussed through the case study of the transportation of sugarcane. For practical assessment of the deterioration of DOH bridge deck, a series of distribution curves of the number of trucks required for the crack to reach different crack levels for different truck categories and gross weights is provided.
His dissertation abstract is copied and posted below.
ABSTRACT
The concept of Markov chain has been widely used to predict the condition of bridge deck. The transition probability matrices, which are mostly developed by inspection data and experts’ opinion, are used to capture the deterioration of bridge deck. The Markov deterioration model developed by this approach although states deterioration in probabilistic sense may not be reliable because relevant variables which affect the deterioration of bridge deck such as changes in traffic volume and environmental conditions are not explicitly emphasized in the model. Concrete cracking which can be accelerated by increased truck traffic is the factor that contributes most to the deterioration of bridge deck and should be addressed in the deterioration model. This research work aims to develop the methodology for developing the hybrid deterioration model for reinforced concrete (RC) bridge deck that combines the quantitative analysis of crack mechanism due to truck traffic loads and the stochastic process based on the concept of Markov chain for the network-level bridge management. In this research, the finite element program that can simulate cracks in RC bridge deck due to truck traffic is developed to capture the crack mechanism. The results are presented by S-N relations of RC bridge deck at different levels of damage. The damage is defined in this study as the extent of crack on the bottom surface of the deck slab or the crack level. Distribution curves of the number of trucks required for the crack to reach each crack level are then developed from the simulated S-N relations and the truck weight information. From these distribution curves and the specified truck traffic volume and composition, transition probabilities based on the concept of Markov chain can be calculated. Based on the proposed technique, transition probabilities can be calculated for truck traffic data that is non-homogeneous with respect to both composition and volume which provides the flexibility of the model to be applied to highway bridges of different truck traffic conditions. The methodology is presented through the development of hybrid deterioration model for Thailand Department of Highways (DOH) bridge deck. In the presentation, the effect of each truck category and the effect of upgrading regulatory truck weights on the deterioration of DOH bridge deck are discussed. The effect of specific overloaded trucks on the deterioration of DOH bridge deck is discussed through the case study of the transportation of sugarcane. For practical assessment of the deterioration of DOH bridge deck, a series of distribution curves of the number of trucks required for the crack to reach different crack levels for different truck categories and gross weights is provided.
Tuesday 11 January 2011
CEIM-SET Congratulates the Graduates of 114th Batch
We would like to congratulate the new graduates who received their diploma during the 114th AIT Graduation Ceremony on December 17, 2010. The names of graduands and their Thesis/Project title are listed below:
DOCTOR OF PHILOSOPHY DEGREE (CEIM)
1. Rajwanlop Kumpoopong
A Hybrid Stochastic/Mechanistic Model for Determining Bridge Condition Rating
MASTER OF ENGINEERING DEGREE (CEIM)
1. Kittichai Kanjanakantika
Risk Factors Affecting Business Diversification in a Real Estate Company
2. Vuong Hai Khoa
Supply Chain Management: A Case Study of Construction Companies in Vietnam
3. Tinn Withayawaragul
Relationship Between Project Phases and Stock Performance: A Study in Stock Exchange of Thailand (SET)
MASTER OF ENGINEERING DEGREE (PROFESSIONAL)
(Area of Specialization: Project Management in Construction)
1. Nguyen Chau Dieu An
Project: A Critical Appraisal of Briefing Clients in the Construction Process: A Case Study of Residential Project
2. Hoang Thi Hai Anh
Project: Risk Management in Price Adjustment Contract: A Case Study of a Construction Project in Vietnam
3. Dang Tuan Anh
Project: Risk Management of Basement Construction Affecting Adjacent Buildings: A Case Study of Construction Project in Ho Chi Minh City, Vietnam
4. Truong Thai Binh
Project: Owner's Involvement in the Preliminary Stage of Real Estate Development: A Project Case Study in Vietnam
5. Nguyen Phan Hoa Binh
Project: Integrated Project Management Assessment for a Development Property Project at the Capital Fund in Vietnam
6. Le Nam Binh
Project: Owner's Project Schedule Management for High-Rise Office Building Projects: A Case Study of the Construction Project of Petrovietnam Finance Centre in Danang City
7. Nguyen Hung Cuong
Project: Delay in Planning, Design and Construction: A Case Study of Residential Development Project in Ho Chi Minh City
8. Le Ngoc Diep
Project: Risks Affecting Construction Cost in Vietnam
9. Do Tran My Thuy
Project: Risk Management in the Design of Large-Scale Construction Projects: Case Studies of an Urban Area and a Highrise Building Project
10. Truong Ngoc Dung
Project: Effectiveness of Feasibility Study Analysis in an Apartment Building Project: A Case Study of a Two Towers-Twenty Six Storey Apartment Project in Ho Chi Minh City
11. Nguyen Duy Thien Giang
Project: Claim Management and Analysis: Case Study of a High Rise Building Project
12. Trinh Thi Thu Ha
Project: Environmental Impacts Assessment in Nam Ly Bridge - Ho Chi Minh City, Vietnam
13. Vo Si Hoai
Project: Schedule Planning and Control in an Engineering, Procurement and Construction Project: The Case of a City Hall Project
14. Le Quang Khanh
Project: Owner's Organization Project Management Maturity: The Case of Petrolimex Saigon
15. Nguyen Trung Kien
Project: Project Owner's Quality Management System - The Case of Sails Tower Project
16. Tran Thanh Liem
Project: Project Management Life Cycle and Risk Management in a New Residential Development Project in Vietnam: The Case Study of the Fifth Street New Residential Project (D2D's Company) and its Secondary Project (Berjaya-D@D Join Venture Company)
17. Nguyen Cao Bao Luat
Project: Design Management in a Design-Build Project Based on the Design Team of Contractor Perspective
18. Vo Dinh Nguyen
Project: Project Management Practice in a Small and Medium Vietnamese Contractor: The Case of Nhat Dang Company
19. Do Huu Phuoc
Project: Owner's Project Life Cycle Approach: The Case of Rubber Plantation Project in a Vietnam Rubber Company
20. Tran Duc Quang
Project: Project Organizational Structure Roles and Responsibility - The Case of Marriott Five-Star Hotel
21. Chona Salvatus Salvahan
Project: Minimizing the Impact of Change Order to Project Costs
22. Nguyen Duy Duc Thu
Project: A Feasibility Study of a Curtain Wall Testing Company in Hanoi
23. Nguyen Le Thuan
Project: Owner's Project Control Strategy
24. Le Mien Thuy
Project: Method and Effectiveness of a Feasibility Study for an Apartment Project: The Case of Carina Plaza Building
25. Nguyen Thu Trang
Project: Application of Fidic Contract in a Bridge Project: The Case of Can Tho Bridge
26. Tran Thi Thien Trang
Project: Assessment of Risks on the Design Management Aspects in Luxury Hotel Development Projects: The Case of Le Meridien Saigon Hotel
27. Nguyen Duc Trong
Project: Organizational Project Management Structure in a Real Estate Developer Company: The Case of Namlong Corporation
MASTER OF SCIENCE DEGREE (PROFESSIONAL)
(Area of Specialization: Project Management in Construction)
1. Mr. Nguyen Duc Thanh
Project: Risk Factors in Vietnam Power Plant Projects: A Case Study of Nhon Trach Power Plant and Camau Gas Power Fertilise Projects
2. Tran Van Trung
Project: The Delay Factors in EPC Contracts in Vietnam: The Case of Uong Bi Thermal Power Plant
3. Mr. Vo Quoc Vinh
Project: Contractual Risks of SME Contractors - A Case Study a of Mechanical and Electrical Contractor
Monday 10 January 2011
Greetings from CEIM/MPM
Dr. B. H. W. Hadikusumo, Dr. Chotchai Charoenngam and the CEIM/MPM staff wish you a blessed and bountiful year 2011!
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