Nguyễn Văn TâmBsc of Civil Engineering, 1997 (CTU, VN)

Lecture notes: TU Delft, Holand

Geotextile and Structural Experiment, 2000

Construction equipment & Method, 2004

MEng of Construction Engineering and Infrastructure Management

2009 (AIT, Thailand)

Claims (Delay and Cost Overrun) in Building Project in Public Sector: Case Study in Mekong Area, Vietnam

Building projects in Mekong Delta, Vietnam

Cantho AirportCantho Bridge

Introduction

An Giang supper market (D)

Aquiculture College, CTU (E)

Medicine and Pharmacy University (F) Bac Lieu Committee Building (C)

Can tho Sport Competition House (B)

College of Technology, CTU (A)

Six building projects of case study

Priv

ate

cont

ract

ors

Pub

lic c

ontr

acto

rs

Problem Statements

Claim status of construction projects

Construction Law of Vietnam and Tender Law are not precisely cover claims.

Unclear claim management and settlement: all claims are approved by owner or investor

(Clause 32 of DecreeDecree 16/2005/NĐ-CP)

Lack of claim knowledge: claim right (legal), Cooperate to mitigate claim and resolve claim events

Role of human resource: management competency, cooperation climate to deal claim issues in project.

Introduction

Research direction

Objective 1

Identification Claim Causes

Objective 2Claim settlement: Analysis

for additional costAnalysis for additional

time

Objective 3Study Claim attitude of

contractor and owner

Scope of study

VietnamMekong area

Public sectorBuilding Projects

Literature review Experts interviewing Case study: Multiple - Case (Yin, 2003) Claim causes? How they are settled? How the claim attitude affect on project?

Objectives

INP

UT

DA

TA

C

OLLEC

TIO

N,

AN

ALY

SIS

OU

TP

UT

Identification of Claims Causes, Settlement and Attitudes

SCOPE- Public Sector- Large Projects- Overrun Cost, Delays

SCOPE- Public Sector- Large Projects- Overrun Cost, Delays

STRATEGY- Literature: finding common claim sources- Project document: finding specific sources- Experts: Clarification, validity and finding new

sources

STRATEGY- Literature: finding common claim sources- Project document: finding specific sources- Experts: Clarification, validity and finding new

sources LITERATURELITERATURE EXPERTS

3 Experts, experience > 15 years (Academic, Govern., Consultant)

EXPERTS 3 Experts, experience > 15 years (Academic, Govern., Consultant)

Document data collection: Contracts, diaries, meeting record and schedules

Document data collection: Contracts, diaries, meeting record and schedules

List of Claims sources, Settlement

and Attitude

List of Claims sources, Settlement

and Attitude

PROJECT SELECTION- 3 Projects of public contr.- 3 projects of private contr.

PROJECT SELECTION- 3 Projects of public contr.- 3 projects of private contr.

Claim causesRelationships’ causesClaim causesRelationships’ causes

Claim causesClaim analysisClaim attitudes

Claim causesClaim analysisClaim attitudes

Ranking claim causesClaim attitudes

Ranking claim causesClaim attitudes

Expert DiscussionExpert Discussion

Interview 6 ParticipantsInterview 6 Participants

Observation

Observation

- 26 Claim causes- Relationships of claim causes- Claim analysis methods: Delay & Cost overrun- Claim attitudes- Claim climate assessment

- 26 Claim causes- Relationships of claim causes- Claim analysis methods: Delay & Cost overrun- Claim attitudes- Claim climate assessment

CONCLUSION- Claim causes- Claim management- Claim culture

CONCLUSION- Claim causes- Claim management- Claim culture

Methodology

Objective 1: Identification Claim CausesObjective

1Identificatio

n Claim Causes

Causes of Delay Time

Causes of Cost Overruns

Causes of Delay and/or Cost overruns

Ranking Causes and Seeking relationship of claim causes

Compare between the initial and final duration

0 200 400 600 800 1000 1200 1400 1600

A

B

C

D

E

F

Proj

ects

Days

Actual duration

Initial duration

Data Analysis

Private Contractor∑ Delay:46%

Public Contractor∑ Delay: 174%

Delay time Analysis

-Average total delay: 110% - Percentage of additional time on total delay: average: 41.57%

Mistakes during

construction, 31.21%

Low productivity,

17.31%

Defective works and reworks, 24.13%

Delay or Disruption,

27.35%

Contractor, 50.32%

Owner,15.34%

External,3.83% Designer &

consultant,30.51%

Data Analysis

Low awarded bid prices: 4.98%. This is strongly affect on delay time due to more number of contractors than building project and unit price to be lower than market price about 10% It is root of shortage of equipment, shortage materials, choosing incompetent subcontractors and suppliers.

-

10

20

30

40

50

60

A B C D E F

Projects

Am

ount

(Bill

ion

VND

)Cost estimate

Initial contract value

Delay time and delay factors of Contractor

Competence of Contractor is a serious problem: Main power, Equipment, and Finance.

Causes of delay of 6 cases (Based on document record, smaller than total delay time)

Delay CausesCaused by

GroupTotal delay

time (days)Percent

Design changes by mistakes Designer 686 21.92%Mistakes during construction Contractor 485 15.50%Additional works by owner Owner 480 15.34%Delay or Disruption Contractor 425 13.58%Defective works and reworks Contractor 375 11.98%Low productivity Contractor 290 9.27%Inspection of completed works Consultant 269 8.59%Unforeseen site conditions External 65 2.08%Price fluctuations External 55 1.76%

Data Analysis

Delay causes of Parties

Contractors have mistakes: foundation tasks as producing and driving pile foundation.

Designers have been small or middle businesses. Foundation structure must be changed due to lack survey soil properties.

Owners have unclear scope, difficult financial and adding works. There are many people can give ideas to change architect and material. (3D model should be used for architect designs- show a clear view for owner)

Roles of owners can motivate or force contractors, consultants and designers to improve all aspects in order to achieve effective and efficient building projects. But they cannot do as contract.

Data Analysis

Cost estimate, initial contract value, claim paid and actual value.

Percentage of decreasing bidding price (average: 4.98%)

Percentage of claim paid (average: 21.55%)

Data Analysis

Cost Overrun

-10

0

10

20

30

40

50

60

A B C D E F

Projects

Am

ou

nt

(Bill

ion

VN

D)

Initial contract value

Claim paid

Comparison between initial contract values and claims paid by the client.

Causes of cost overruns Causes of cost overrun of 6 cases (Based on document)

Design changes by mistakes,

30.03%

Price fluctuations, 23.57%

Additional works by owner, 22.04%

Unforeseen site conditions,

16.67%

Inaccurate estimates, 7.70%

Adding cost factor Groups Claim Amount (VND)Percentage of Claims

Design changes by mistakesDesigner 9,437,909,000 30.03%Price fluctuations External 7,408,428,000 23.57%Additional works by owner Owner 6,926,039,000 22.04%Unforeseen site conditions External 5,239,300,000 16.67%

Inaccurate estimates Designer 2,420,273,000 7.70%

Causes of Cost overrun: Competence of Designer, small scale consultant firmsOwner has many personnel who have high power to change

Data Analysis

26 factors of Delay and/or Additional Cost Relationship Network (from expert interview and literature review)

Design changes by mistakes

Inaccurate estimates

Owners’ site clearance difficulties

Incompetent subcontractors

Low awarded bid prices

Financial difficulties of owner

Lack of capable project managers

Delay and/or

Additional Cost

Mistakes during construction

Additional works/ reworks by

owner

Defective works and reworks

Delay or Disruption

Unforeseen site conditions

Shortages of materials

Financial difficulties of contractor

Slow payment of completed

worksPrice fluctuations

Designers’ inadequate

experience and capability

Shortage of equipment

Low productivity

Inappropriate construction

methods

Bad weatherUnclear contractual

conditions

Obstacles from government Inspection of

completed works

Shortages of skilled workers

Lack of capable site supervisors

Compensation from owner

No Compensation

from owner

Data Analysis

Objective 1

Identification Claim Causes

Objective 2Claim settlement:

Analysis for additional cost

Analysis for additional time

Objective 2: Claim Analysis

Extension of time analysis

Delay time due to owner

Delay time due to contractor

Method analysis: As-planned versus As-built, Global claim

Additional cost analysis

Direct cost

Indirect cost

Data Analysis

Delay analysis issues

In six building projects, there are not data actual resource usage and monthly update.

Float ownership: “Who owns float?”

Concurrent delay

Logic change (Hard VS Soft logic)

Resource allocation due to delay or logic changes

Data Analysis

Additional cost analysis

Direct cost: cost of additional works out side contract Material, equipment and labor cost Unit price is applied as unit price in contract or update due to price

fluctuation Quantity is noticed and submitted during construction stage and

approved by the engineers of owner.

Indirect cost: do not estimate through 6 cases Overhead cost (site and office overhead cost) Financial cost However: they are not compensated by owner.

Data Analysis

Bad Strategy of Contractor to deal with indirect cost

Construction law VS Tender law about definition of main contractor and subcontractor obligation. Thus:

Change subcontractors which were not written in bidding document.

Cannot manage delay, quality and cost.

Subcontractors are small and local contractors with old equipment, unskilled labors (farmers) and lack managers or engineers to decrease indirect cost when the project is delayed too long.

Just in time to delivery material and equipment. No warehouse cost.

Site office

Local labors

Local equipment

Data Analysis

Some issues of claim analysis are found through six building projects.

Tools to monitor and control delay and cost overrun are not used: CPM: use & update Earn value concept Assessment of cost control systems (Chotchai Charoenngam, 2001)

Construction Law, Tender Law Some clauses are contradiction together Contract is not managed effectively. Unclear claim procedure (specially, delay analysis method) Contracts are not strong constraints. Owners cannot force contractor to use

equipment and labors which have good quality as bidding document.

Human resource Lack project managers. Cooperation is not used to allocate risk and mitigate claim: passive to deal

claim events, extend time to approve claim procedures.

Data Analysis

Thank you!

5/2010

Nguyen Van Tam