Factors Affecting the Performance of The International Construction Contractors (ICCs) Doing Business in Cambodia

International construction business is the kind which embodies with serious economic, social, and political ramifications leading to the failure of the international project success in term of time, quality and cost (Walewski, 2003). The difficulties such as client communication, understanding new market, avoiding local politics and supervising the diverse group of professionals are confronted by the international construction business (Kangari and Lucas, 1997). Moreover, the inability to understand the clients’ requirement affects the project success in international business (Ling et al., 2006). The increasing of the misunderstanding, delay and costs resulting from unfamiliar environment and different institution such as regulations, norm, and cognitive-cultural belief with diverse participant are critical things (Will and Levitt, 2010). As Han et al.,(2005) stated that the risk factors associated with overseas construction projects can diminish project profitability .There are many researchers found that the delay and cost are increased due to the confusion among project participants (Flyvberg et al., 2003; Miller and Lessard, 2000; Orr, 2005), and due to dispute resulting from different cultures (Ghopshal, 1987).

Mr. Hout Venghong made a research on an international construction contractor (ICCs) doing business in Cambodia in order to: (1) investigate the current practices of the factors affecting the performance of the international construction contractors doing business in Cambodia; (2) develop the causal relationships affecting the performance of ICCs model of each investigated factors and figured out how each contractor copes with; and (3) propose the recommendation and a framework to the international construction contractors to take into account in order to do business in Cambodia.

Research Findings

Investigated factors affecting the performance of the International Construction

Contractors (ICCs) doing business in Cambodia

Based on the data gathered, there are five factors influencing the decision making of the international construction contractors doing business in Cambodia taking to the account to strategize accordingly in order to execute the project lucratively. The current practices of the factors affecting the performance of ICCs doing business in Cambodia are:

(1) condition of the host country and project owner,

(2) international construction contractors’ ability,

(3) characteristic of organization and participation,

(4) entry mode, and

(5) Uncontrollable variables with nineteen sub-factors.

Develop the causal relationships affecting the performance of ICCs model of each investigated factors and figured out how the firms response to each factor

1. Cambodian Government policy. The government does not have clear procedure for project approval and construction law and regulation for the construction projects. The tax and custom system, still, are not transparent which can affect to the project schedule and performance as well. The unethical practice, construction law and regulation should be completely addressed the firm from the beginning of the planning stage. The procured materials have to be taken with high attention in order to meet the projects’ objectives to avoid delay and cost overrun. Lack of construction law and regulation with weak legal system leads the firm hiring a legal advisor or international lawyer to prepare the legal documents related to avoid the conflict during the projects execution. The legal advisor or lawyer is asked to involve after the international construction contractors awarded the contract.

2. The unskilled labor issue in Cambodia construction sector. This is a big problem challenging the international construction contractors, especially when the project is complex and very specialized. Because construction market in Cambodia is not really attractive yet. There are quite few tall buildings and complex projects in Cambodia. Consequently, this provides less opportunity to the local laborers to experience with similar project. Even the local labor cost is cheap but the problem is unskilled laborers who are mostly farmers, so they will quite the project to go back home.

3. Lack of local skilled engineers who are able to use English as official language, especially for technical terms in construction project. The knowledge of local engineers was considerably limited since they did not have a chance to involve with similar complex projects. The local contractors are lack of knowledge in quality control and they are mostly not qualified for either big projects or specific projects. The employment of the staffs has to be mixed because the local staffs need to coordinate at construction site between the local labors and foreign staffs. The research is also found that the entering of the international construction contractors is to consider market attractiveness with the local government support.

4. Owner delayed payment. It plays a crucial role to the quality of the project, delay payment will results to time delay.

5. No local financial institution to help the contractors or subcontractors. The lack of the big local contractors to join the international construction contractor is one constraint that the international firms do not want to do business in Cambodia. The firm has to ask for the home country contractor or the third country to execute the project. This is still riskier than joint venture with the big local contractor in case they find the suitable local contractor to make a joint venture.

6. Most of the projects are under loan or grant projects from ADB, World Bank or the other financial institution, therefore the international construction contractors did not want to bid the projects, because they are so competitive. On the other hand, the contractors who want to launch their projects with high quality to maintain their good reputation will not bid the public projects, because the project volume reflects to the skilled labors and many subcontractors to execute the project as well.

Recommendation

Based on analysis of current practices of the international construction contractors doing business in Cambodia, below is the summarized recommendation for the International Construction Contractors.

His thesis abstract is copied and pasted.
Abstract

This study aimed to investigate the factors affecting the performance of the international construction contractors (ICCs) doing business in Cambodia. Five firms in Cambodia were investigated through case study approach explanation building strategy as specific analytic approach in case study. The current practice factors/sub-factors were verified with nine industry experts and practitioners experienced in Cambodia construction industry. The administered research questions developed by a researcher being conducted with seven top management level of ICCs. In addition, the secondary data and the direct observation of the construction projects are carried out to get the supportive evidence to the result from the interview session. However, the short interview with the persons who were responsible at construction site was carried out during project direct observation. The research showed that the unethical practice, unclear tax and custom system, material availability, unskilled labor issues, lack of construction law and regulation, lack of legal system, unwillingness of local government support, different practices between the contractor and designer. From the finding, the response of the international construction contractors was pointed out with the each investigated factors accordingly. Objectively, the causal relationships affecting the performance of ICCs doing business in Cambodia was developed with the recommendation for better practices in Cambodia construction industry.

Influence of Financial Risk for Project Financing throughout Real Estate Development Process: A Case Study of a High Rise Apartment Project in Vietnam

Many risks and opportunities occur in real estate market, especially during development phases (Mou, 2007). However, in Vietnam, there is a lack of knowledge about the influence of financial risk in real estate development process. Therefore, Mr. Nguyen Quoc Trung tried to research the influence of financial risk to project financing throughout development process. Furthermore, his study tried to explore relationship between the financial risk, the development process and the project financing to reduce its influence. The objectives of his study were: (1) to investigate the real estate development process in high rise apartment project and to indentify financial risk factors in each activity of process; (2) assessment the critical factor of financial risk on the development process and the influence of these factors to project financing throughout development process; and (3) purpose the conclusion and recommendation to reducing the influence of these factors on the project financing throughout the development process.

Research findings

1. The real estate development process and financial risk factor happen on this process in high rise apartment project

The first objective of this study is to find the financial risk and development process of high rise apartment project. After analyzing the data, it was found out that financial risk has 4 categories: legal risk, leverage risk, financing risk, inflation risk and risk of construction cost. While the development process of high rise apartment project includes 4 phases, there are project allocating, feasibility study, contract – license – commitment and execution and sell. The financial risk factor in each phase of development process is verified by expert and this supports for the developer, the real estate company and who related in development process of high rise project to get the overview picture of real estate development process and the financial risk happen in each step of process.

2. Assessment the critical factor of financial risk on the development process and the influence of these factors to project financing throughout development process

Base on the frame work, the development process and financial risk happen in each step of process. The researcher assessed all financial risk factors in each step of development process throughout the case study. This assessment was done by the development team of Project A, who directly manages this project. The assessment of influence of financial risk factor in development process and database of this project is analyzed to get the critical factor of financial risk on development process. The financial model of project is integrated with the critical factor of financial risk throughout development process for analyzing influences of critical factor of financial risk to project financing model throughout development process.

This finding shows the practice of development process in high rise apartment project and the influence of financial risk on development process. In this finding, the legal risk and leverage risk can lead to financing risk, inflation risk and risk of construction cost on the development process. Every activity of development process has relationship to each other. So, in each phase of project, the financial risk factor has impact to each other. This finding also shows the gap of perception of Real Estate Company about the influence of financial risk on development process. The Real Estate Company always wants to control the cost of the construction project but the real estate company forgets that the more important is the maximum profit of project. With this reason, the real estate company does not understand the demand of housing characteristic for project design of each segment in market. They always focus on the cost if this project is mid end or low end project. The delay for project operation increases the inflation cost and construction cost but decrease the profit of project.

3. Recommendation to reducing the influence of financial risk to project financing throughout development process.

The project financing in real estate development process is the key for successful project. To reduce the influence of financial risk in each phase of development process is the key for making decision for risk management. In order to achieve the maximum profit of project and control the cost of project, all of financial risk need to reduced and controlled. The recommendation to reducing the influence of financial risk to project financing model throughout development process is summarized in the table below.

His thesis abstract is copied andposted.

ABSTRACT

The real estate company always want maximum the profit and minimum the cost of project. With this purpose, the real estate company manages the financial risk to get the profit and control the cost. The real estate development process is complex project and very risky. In this process, the financial risk impact to project financing dramatically. With this reason, the influence of financial risk to project financing throughout development process is studied to support the real estate company and actor related in development process in order to make solution reducing the influence of financial risk to achieve objective of project.

This research was conducted to fulfill the three objectives. (1) to investigate the real estate development process in high rise apartment project and to identify financial risk factor in each step of development process; (2) to assess the critical factor of financial risk on the development process and the influence of these factors to project financing throughout development process; (3) to purpose the conclusion and recommendation to reducing the influence of these factors on project financing throughout the development process.

The result of this study found that the perception of Real Estate Company do not correspond with the influence of financial risk. The financial risk factor impact the both source of fund and use of f

und of project which is included the project financing model throughout each phase of development process. All of consequence of risk factor is show in execution and sale phase. This makes profit of project decrease dramatically and increase the construction cost. This study also shows that Vietnam has not yet created a convenience environment for the real estate business.

Key words: Real estate, development process, project financing, financial risk, risk factor, case study, Vietnam

Factors Affecting Operation and Maintenance Costs of Ho Chi Minh City Condominium Projects

The management of condominium project during the operation stage is an emerging problem for project owners. Normally, the owners focus on development stage and construction stage of the project. They mainly concern in problems related to planning, design, and execution (Arditi & Nawakorawit, 1999a).

In order to recommend to owners or property managers appropriate solutions to control and reduce O&M expense. Mr. Duong Quang Minh made a study which, first, will develop operation and maintenance cost system of existing condominium projects. The purpose is to identify the most important costs in this system. Second, the study will investigate the reasons that cause the cost. Thus, the three main objectives of his study were to: (1) build a generic framework for operation and maintenance cost system of existing condominium projects; (2) find out and assess factors affecting on operation and maintenance cost of existing condominium projects; and (3) recommend solutions to reduce or control the impact of the factors that influence on O&M costs.

Conclusions

For Objective 1

The study analyzed cost data from five case studies to identify the most important cost of operating condominiums. Each cost was given a brief definition, its components, and characteristic. Then, the study developed the generic framework of operation and maintenance cost of condominium projects. The framework is benchmark to compare O&M costs between condominiums.

From the benchmarking, the study found that cost for condominium management is the highest cost with about 46.42 percent of total O&M cost. In addition, energies supplying for common activities of condominium are also high with about 18.26 percent of electricity consumption and about 9.23 percent for water consumption. Also, costs of cleaning and waste disposal are high by about 9.61 percent and costs for maintaining lifts are 6.01 percent.

The reasons behind this high cost include:

1. Management cost: The reason may be inappropriate choices between in-house or out-source employment.

2. Energy consumption cost (Electricity and water supply): There are three main reasons that cause high expense for this cost center such as general facility influences, installation of an old-fashion technology in the facilities, and maintenance policy including lack of daily inspection and preventive maintenance.

3. Maintaining lift cost: Maintenance costs of lifts are costs connected to planned maintenance works to the lifts in the common areas of condominium.

4. Cleaning and waste disposal cost: Reasons that may cause cleaning service cost is lack of design specification of cleaning tasks and inappropriate choice of construction material, specially decorated material.

Objective 2

There is no significant difference between in-house and out-sourcing employment condominium managers. In general, both managers pay attention into reducing operation and maintenance costs. However, based on characteristic of each employment type, the condominium managers have different maintenance strategy to perform the maintenance task effectively. Therefore, they have different perception about the factors that influence to O&N costs.

Recommended solutions to reduce or control the impact of the factors that influence on O&M costs

For new condominium projects, property manager is usually the one that handles all the defects or design faults after the completion of construction stage. Base on accumulated experiences in handling the defects from different building projects, the property manager can feed back what they have suffered from the experiences to the project team. Besides, as the property manager's role is to manage the property, they usually meet the tenants that propose many expectations or requirements to make better living condition of condominiums. These expectations may be valuable information for the owner to make the right decision when investing in new condominium project. In order to better manage the project, property manager should:

• Select appropriate in-house or out-sourcing staff to perform maintenance tasks efficiently

• Imply conservation energy program in order to control and reduce energy consumption

• Pay attention in the management of maintenance task for lift system

• Pay attention in the management of cleaning tasks

The recommendations for the first finding are shown in the below.

There are two recommendations for condominium managers. One is for in-house employment condominium and another for out-sourcing condominium.

For in-house employment condominium, if the condominium owners decide to employ in-house staff to perform the maintenance task, they should invite maintenance specialists to give their advisories during the design stage in order to reduce the maintenance costs as well as operation costs. On the other hand, if there is no participation of maintenance experts in the design process and there are many problems occurring during the operation stage, the project owners should use external staff to perform the maintenance work.

For out-sourcing employment condominium, there is a strong wish of out-sourcing condominium manager about the provision of construction material information. In order to perform maintenance tasks efficiently, the project owner should ask the designer that provides the specification about the characteristic of construction material using for the project. Especially in the case that project owner decides to use out-sourcing staffs.

His thesis abstract is copied and pasted.

Abstract

High-rise residential property management sector in Vietnam is still staying at the early stage of development. There is lack of maintenance concept of building development because most of project owners are only attracted in completion project. Condominium managers have not appropriate maintenance policy for the completed building, and it deteriorates faster than expected service year. Maintenance issues become emerging problems that should be concerned. This study aims to investigate practical management of condominium projects in Ho Chi Minh City through management of operation and maintenance expenditures.

Around the areas of HCMC, the researcher visited many exiting condominiums that have been operating since year 2000. In achieving these objectives, opinions of in-house employment condominium managers and out-sourcing employment condominium managers were sampled through structured questionnaires. The data collected were analyzed using descriptive and inferential statistics. There is a difference between condominium manager’s perception about two sub-factors affecting on operation and maintenance cost. They are “Lacking of involvement of maintenance experts during design stage” and “Materials selection does not comply with the client's activities due to inadequate accurate material information source”

On the other hand, real cost data were also collected from five condominium projects. The purpose the study was that identified the most important O&M costs of condominium by comparing costs among condominiums. Benchmarking was established to compare cost each other. The result of comparison was that found out six most important cost including management cost, electricity consumption, water consumption, cleaning and waste disposal, and lift maintenance cost. After all, the study proposed many solutions that not only help condominium managers managing their assets better but also help other participants concerning about maintenance issues for developing new projects.

Factors Affecting Constructability Practices in Hydropower Construction in Nepal

Nowadays, the construction industry lacks constructability, which causes many problems, such as increased cost and time required for constructing a project, reduced productivity of project personnel and equipment, and low-quality construction (Nima et al., 2002). In this connection, it is worthwhile to investigate the drawbacks of the existing practices and application of constructability concepts.

Systematic application of constructability concepts will enhance constructability of a project. Consequently, schedule, quality and cost are optimized and all the parties are benefitted from the project. Nepal is practicing constructability concepts in hydropower development however these concepts are not recognized with importance by the key practitioners. Mr. Mukesh Khadka made a case study which objectives were broadly divided into following three parts:

i. To find out constructability concepts and implementation barriers applicable for different phases of hydropower project namely conceptual planning, design and procurement, and construction/field operation.

ii. To identify the degree of importance, level of application and major implementation barriers of constructability concepts in hydropower construction in Nepal.

iii. To propose recommendations for the effective application of constructability concepts in the hydropower project construction in Nepal.

Conclusions

1. Identification of constructability concepts and implementation barriers

For Nepal, thirty-six constructability concepts suitable for hydropower projects are identified out of which seven concepts are suitable for implementation during conceptual and planning phase, twenty-one concepts for design and procurement phase, and last eight concepts are suitable during construction or field operation phase. In hydropower industry, 49 implementation barriers were obtained from expert review and play key role to deter the implementation of constructability concept.

2. Identification of degree of importance, level of application and major implementation barriers

The result of this study confirmed that six concepts are very important constructability concepts in overall respondents’ opinions. The very important constructability concepts are (1) provide detail and clear design information, (2) investigate the impacts of design on safety during construction, (3) documentation of works of good contractors based on quality and time, (4) carry out thorough investigation of the site, (5) evaluation, documentation and feedback of the issues of the constructability concept, and (6) technical specification. Remaining thirty constructability concepts is accepted as important constructability concepts for hydropower construction in Nepal.

The research has also revealed that none of the concepts are being highly applied in hydropower construction in Nepal. All constructability concepts are believed as concept with medium application except three concepts namely, (1) innovation on temporary construction materials/systems, (2) employ any visualization tools such as 3D CAD to avoid physical interference, and (3) design to avoid return visit by trade which fall into category of concepts with little application.

During the study, major constructability implementation barriers were identified and ranked as top ten implementation barriers. These barriers were further grouped into three dimensions named as (1) Ineffective communication and coordination, (2) Socio-political influences, and (3) Insufficient resources using factor analysis. Ineffective communication and coordination between parties may cause conflicts that could eventually impact the project constructability adversely leading to dissatisfaction of the project parties, reworks, variation orders and claims. Not following the execution plan of the project may hamper the critical path of the project thereby causing the time and cost overrun of the project. Socio-political influences are the major barriers of hampering implementation of constructability concepts. Disruption by local people and road strikes imposing various reasonable and sometimes unreasonable causes seriously hamper the project constructability. Insufficient resources due to limited project budget also hinder the implementation of constructability concept. Due to lack of incentives given to the employees, it is very difficult to implement the constructability improvement concepts as employees are the key player for applying them.

Recommendations

Further study is recommended for the following subjects:

• Further study considering large number of hydropower projects of various sizes, different financing models and identification of specific barriers for each constructability concept is necessary in milieu of developing guidelines for hydropower projects

• Further study can be extended to find the detail procedures for effective application of those constructability concepts in hydropower construction and to find the most suitable contracting approach which facilitates effective constructability application.

• A study on suitability of constructability issues in various kinds of contracting approach can be done.

His thesis abstract is copied and pasted.

Abstract

Nepal has favorable condition to develop numerous hydropower plants yet it is facing eighteen hour load shedding per day during dry season. Traditional approach adopted in Nepal for hydropower construction involves many problems such as design changes, reworks, poor safety practices, time delays, cost overruns, disputes, claims which hampers constructability of the project. In this context, it is worthwhile to conduct research which focuses on investigation of the degree of importance and level of application of constructability concepts and identifying the major barriers hindering effective implementation of those concepts. The findings would be appropriate for the preparation of baseline required in constructability improvement guideline for hydropower construction in Nepal.

Thirty-six constructability concepts and forty-nine implementation barriers related to hydropower construction in Nepal were selected for detail study after extensive literature review and expert verification. Through questionnaire survey, opinions on those constructability concepts and implementation barriers were collected from fifty-three managers/engineers associated with hydropower developers, consulting firms and construction companies involved in hydropower construction in Nepal. The quantitative data gathered were then analyzed using various statistical techniques to conclude and recommend further studies. The result of this study revealed that six constructability concepts were accepted as very important concepts by overall respondents and the remaining concepts were considered to be important. To the contrary, none of the concepts are being highly applied in hydropower construction in Nepal. Further, ten major constructability implementation barriers were identified and grouped as ineffective communication and coordination, socio-political influences, and insufficient resources using factor analysis.

The effective implementation of constructability concepts in hydropower projects in Nepal can be attained by developing guidelines for the application of those concepts. For preparation of the guidelines the concepts identified by the study need to be verified with hydropower projects of various sizes and different financing models and detail procedures for applying those concepts should be documented. Also, identification of specific barriers for each constructability concept is necessary in milieu of developing guidelines for hydropower projects.

Keywords: constructability, buidability, implementation barriers, hydropower, Nepal

Risk and Project Contract Management for Preventing and Solving Disputes in FIDIC Contract

A project is highly successful when risks are strictly controlled and the contract is effectively managed.

Mr. Dang Thai Son made a case study on the Can Tho Bridge Construction Project. In his study, the following core issues were aimed to achieve:

* To study issues on project risk management: implicit risks, the tenor and process of project risk management.

* To study issues on project contract management: signing and implementing the project contract, amending, canceling or terminating the contract.

* To find approaches to mitigate risks as well as to prevent and resolve disputes, litigations in project contract.

Conclusion

Risks are unavoidable in construction projects, yet it is still possible to prevent them before and during a project. With such a length (15.85 km), Cantho Bridge was a typical example for risk management. The project has received full financial support from the Japanese government which is Twenty Four Billion Eight Hundred Forty Seven Million Japanese Yen (¥24,847,000,000). However, there was still delay in land requisition. Although only two local households did not agree on their compensation, they affected the progress of the project. In addition, shipping equipment and complex custom procedures also hindered the progress.

On the better side, the Contractor has implemented good management starting with the designed hierarchy of management with well-targeted goals as well as backup plans. This helped the project progress even in case of force majeure. Second, the contractor had good management on quality and quantity on various aspects of working requirements such as materials, equipment, construction methods and skilled labors that were focused and well-prepared. Thirdly, the Contractor showed that environment was taken with extreme care so that almost no effects on the local landscape, and ecosystem were done by pollution from the construction. Finally, the Contractor always followed the most important motto: "Safety first." The disastrous accident in foundation settlement showed the nature of risk on one hand; but on the other hand, it showed that the Contractor prepared and implemented practical and helpful steps in preventing diseases and treating injuries to workmen. As a result, construction workers felt better and secure to continue their work and the project could be completed in due time.

After Can Tho Bridge was completed, it has provided the researcher with practical experience in terms of capital, specific infrastructure conditions, hi-tech quality of the contractor and compensation negotiation. This study showed that reality is always unexpected but with well-planned risk management, we can still handle and heal the uninvited damage to project effectively and in time so as to fulfill the project as pre-planned.

In conclusion, throughout the analysis, the Can Tho Bridge Construction Project achieved more successful factors than its constrained ones. This project obtained good delivery system from setting to closing out phase owing to good environments such as stable society economy and politics, favorably legal environment especially the great support from the project stakeholders: Financier (JIBIC), Owner, Consultant, Contractors, Suppliers and others (Local Authorities and so on).

Apart from the strengths achieved as analyzed, there are many weaknesses that the project stakeholders should pay much attention to and should take them as valuable recommendations for future projects:

- Before carrying out the construction of any project, the Project Owner together with Local Authorities shall ensure land requisition to be well-executed and give right of access and site possession to the Contractor at appropriate time without any delay and obstruction from local residents.

- When making the estimation for a project, besides calculating an official capital source for the main items of the project, the project planner should carefully calculate an extra money fund for nearby existing land compensation including the crops. Therefore, the Project Owner will be able to get sufficient land area and provide further access to the Contractor for construction. Because the construction activities of the Contractor definitely affect to the neighboring structures of the inhabitants.

- The Project Owner should thoroughly consider selecting competent, qualified contractors who are healthy in finance and capable of high technology. Not to give the award to the bidder of the lowest price, and poor equipment and poor technology transfer.

It was time for Vietnamese Government and its subordinating Ministries consider carefully when deciding to select the bidder especially for foreign ones. Before inviting them for bidding, a well pre-qualified selection of experienced, prestigious and competent bidder list should be made and elimination of unqualified bidders from the list should be done. If doing so, the Government saves a lot of time and money for unreasonable loss and damage from rectification of defects and re-works.

His thesis abstract is copied and posted.

Abstract

Risk management is an indispensable job because it will help the project reduce and minimize the extraordinary impacts occur which affect to the general objective of the project.

In this study, we should learn about the concept of risk with its two specific characteristics: probability of occurrence and degree of impact. In addition, the classification of risk is also a meaningful deed; each kind of risk is different, therefore, risk management issue is also totally different. To manage risk, a process of six steps can be applied. First, making risk management plan for general orientation of work and scope of performance to manage the risks. Then, carrying out risk determination, it means to list out the risks might occur in the project. Since then analyzing probability of occurrence and the degree of impact of the risks, Control and adjustment of risks are to implement the plan for dealing with actual risks.

Contract management is extremely important in the project management. Referring to the contract, the project manager will treat and adjust the relationship as well as contradiction between interests and liability of the parties concerned in the project. Therefore, being a project manager, he or she needs to master the sequence of steps of signing and implementing the project contract, the arising issues and conditions of alteration, omission or termination of project contract as well as the approaches to resolve and settle disputes in the contract. Once dispute arises, it is wise that the parties should seek for negotiation, discussion or conciliation. This approach is simple, effective and little cost while claim and arbitration approach is more complicated, costly and waste of time.

“Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fee, expenses and waste of time.”- Abraham Lincoln

Business Cooperation Contract Management in Gas Pipeline Project – A Case Study of Block B – O Mon Gas Pipeline Project

The signing of the business cooperation contract (hereinafter called BCC) to develop the Block B Gas Pipeline Project among PV Gas, Chevron, MOECO, and PTTEP will help to ensure the country's energy security and to promote industrial development in the Mekong Delta. The project will also save a significant amount of foreign currency for Vietnam on fuel imports, create more employment for the community, protect the environment by using a clean fuel, ensure a stable source of power, and open opportunities to connect with the gas pipeline systems of other countries in the region. However, how to well monitor and manage the pipeline project under the BCC is the challenge for operator.

Under BCC, each party will appoint a representative to the board of coordinators (hereinafter called BoC) to provide overall supervision and direction over and control all matters pertaining to the system operation. Therefore, the operator cannot decide on its own for the system operation which may lead to run late project, over-budget or fail to meet key needs of parties and so on. There are definitely some shortcomings in project under BCC need to be over, that are:

i. Take time for mutual agreement among parties;

ii. Misunderstanding and misinterpreting of stipulated clauses in contracts

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

iv. Conflict between cultures

A BCC is generally applied for managing the oil and gas 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 Mr. Phung Quang Hiep made a case study which main object was to focus the Phung Quang Hiep

issues related to BCC:

1. To study BCC contract objectives

2. To study BCC contract conditions

3. To study BCC contract implementation and problems occurring

4. To propose effective solutions for project management under BCC

Conclusion

BCC Objectives:

The purpose of this report is to describe the BCC objectives in which the project is implementing the design, procurement, construction, ownership, operation, maintenance of the upstream Block B & 48/95 and Block 52/97 facilities to ensure economic, efficient System development on an integrated, aligned basis, as set forth in this Contract.

BCC Conditions:

These objectives are concretized under BCC conditions of conditions precedent and participating interest. Block B – O Mon pipeline project has some difference phases. Therefore, the writing displays them in three main groups of technique, finance and legality. Technical phases include construction, operation and maintenance of system; transportation proposal and capacity; usage of the system, transportation of gas and tariffs; as well as decommission. In addition, financial issues of BCC are focused on taxation; government and corporation support; work program and budget; and contracting procedures. Also, BCC requires legal items in operation that are, insurance and litigation; default, assignment of participating interest; withdrawal; and dispute resolution.

BCC Implementation And Problems:

The above analysis is to result to business cooperation contract management for block B – O Mon pipeline project through making up factors affecting to take time for mutual agreement among parties, underground drivers of misunderstanding and misinterpreting of stipulated clauses in contracts and conflict between contractor and the project company during project execution as well as conflict between cultures. To response to these problem statements, this report concentrates on studying problems occurring and proposing effective solutions for project management under BCC as well.

This project may be continued if precedent conditions are satisfied or waived. That foreign- factors take part in business of gas pipeline and that disadvantages are caused by BCC have created some outstanding problems to system operation. The report asserts that issues of finance, accounting, culture, legality, risks, approval and human resource are needed to analyzed, improved and boosted. Otherwise, project will be delayed in the manner of time and quality and not achieved project objectives.

Effective Solutions for Project Management under BCC:

For finance and accounting issues, the operator has to harmonize regulations between BCC and Vietnamese Corporation Accounting which is first priority while the parties are required to obtain deep understanding of investee country, that is, Vietnamese laws. Moreover, due to four different management cultures the operator should set up harmonious business culture, seminars, team build to interpersonal communication and friendly atmosphere and especially maintain internal control of approval procedure and authorization for expenditure procedure. A unified and well defined organizational chart for human resource management is so important for continuous system operation. All above is to minimize business risks led by project specialization.

In addition, the report shows out main experience lesson groups to solve these problem statements. First, the operator should take full advantages of local authorities and governmental support in all tax and foreign currency issues. Second, the operator needs to have closer direction and management of higher authorities to keep the project be in the right way. Third, taking an initiative of finance, positioning negotiators of BCC in the board of operator and maintain frequently periodic meeting are considered as meaningful recommendations to unbind stuck bars during implementing project and achieve project objectives in timely and quality basis.

His thesis abstract is copied and posted.

Abstract

Natural gas is a fossil fuel extracted from the ground that can be used as a source of energy for household, industrial and commercial use, as well as to generate electricity. So, natural gas is an important factor for the development of countries that have strong economies and people who enjoy good living conditions. To be able to have a viable and efficient supply requires the construction of a pipeline from faraway regions that have large reserves of natural gas to onshore terminals. In Vietnam, the projects of pipeline construction and operation are almost under direct foreign investment of which business cooperation contract is the most favor.

The management of this contract is a challenge to Vietnamese operator due to foreign factors. This report let a case of BCC for block B – O Mon pipeline project as a study of project management in construction. It tries to work out common and regular problems this kind of BCC is encountering. These difficulties are divided into four groups that are, take time for mutual agreement among parties, misunderstanding and misinterpreting of stipulated clauses in contracts and conflict among contractors and the operator during project execution as well as conflict among cultures.

Moreover, BCC conditions and project phase operation are analyzed in details. Above all, the author suggests some solutions focusing on outstanding problem statements to improve the project operation and implement it in the manner of time and quality.