1. Chinese Overseas EPC Project Management Kaibo Engineering Group Corp. BeijingOct 2010KAIBO ENGINEERING GROUP CORP.

2. Personal IntroductionMBA, Duke University, USA.Bachelor in Engineering , AUT University ,New ZealandMr. Tom Zhu has extensive engineering project consultingexperience internationally, including in China and NewZealand. Tom has been involved in several startup projectsin both countries. In addition to civil engineeringprojects, Tom also possess significant experience in theMr. Tom Zhu real estate sector.ContactTel +86-10-59073235Email tzhu@kaibogroup.com 2 3. Kaibo Engineering Group . Core Business International project managementEPCMPMC . Core Team Kaibo Groups team is made up of project management scholars and researchers from prestigious academic institutions like Yale, Duke, Stanford, and experienced engineering project management specialists. . Main Accomplishments Kaibo Group has accumulated extensive international project management experience in China, US, Australia, and Africa, among other nations. Kaibo Group has developed a remarkable reputation in international project management field. In 2010, it undertook engineering project management and consulting work on projects in Australia and Africa, at a total value of over 4 billion USD. 3 4. Contents I. Chinese enterprises overseas project marketdevelopment II. Chinese main project cases III. Current Chinese Overseas Engineering ProjectManagement Situation IV. Current International Project Management Features V. How To Manage Chinese Engineering Contractors 4 5. . Chinese enterprises overseas project market development() History of Chinese enterprises overseas project development() Primary Markets and Project Cases() Project contracting market in Africa5 6. () History of Chinese enterprises overseas projectdevelopment1. 1950sDuring this period, Chinese overseas projects were focused primarily on rebuilding Asianand African countries2. Initial stage (1978-1982) :In 1978, Chinese enterprises began to enter the international engineering contractingmarket. Before 1983, Chinese enterprises that were engaged in foreign project contractsand labor service cooperation contracts totaled less than 30. The total value of signedcontracts was $1.25 billion, and the completed turnover was $560 million.3. Stable growth stage (1983-1989) From 1983 to 1989, China accumulated a total of $11.56 billion in foreign engineeringcontracts and labor service cooperation contracts, and the completed turnover was $7.2billion. The market has expanded to more than 130 countries and regions.6 7. () History of Chinese enterprises overseas projectdevelopment4. Rapid development stage (1990-1999)Between 1990 and 1998, Chinese enterprises signed foreign contracted projectsand labor cooperation contracts that totaled $70.66 billion at an annual increase of24.1% and completed turnover of $50.59 billion at an annual increase of 27.3%.5. International market takes important position (2000-present)There are currently over 2,000 eligible Chinese companies for foreign contractedprojects, and the business scale is rapidly expanding. In 2010, there was a total of54 Chinese enterprises in the ENR top 225 international contractors who won13.2% of international market share, the most in the world. Overseas turnover was$50.57 billion. 7 8. . Chinese enterprises overseas project market development() Primary Markets and Project Cases 8 9. () Primary Markets and Project Cases1. Primary Markets: Tender amounts distribution of Chinese enterprises overseas projectChinese enterprises overseas markets in 2009project markets includeAfrica AsiaAfrica, Asia, Middle Latin AmericaThe Middle EastEast, Europe, LatinEuropNorth AmericaAmerica, North America, etc. Oceania5% 2% 13%39%17%24% 9 10. () Primary Markets and Project CasesPrimary investing target countries:In 2009, the primary overseas markets of China International Contractors include: Iran, Venezuela, India, Saudi Arabia, Libya, Vietnam, Sudan, Algeria, Nigeria, Angola, etc.. Among them, the tender amount in the African market accounted for about 39% of the total amount. Tender amounts of top-ranking countries are as follows:New contract amounts rank in Afica markets of China.(100 millionU.S. dollars) 58.444.34 39.9639.45LibyaSudan Algeria Nigeria10 11. () Primary Markets and Project Cases 2. Types of investmentDistribution of project investment types in 2009 projects: Tender Amount(%)Value(%)49Chinese enterprises overseas projects34 primarily include: 25 transportation, housing 13 13 11 9 7 7 10 6 54 3 construction, petroche 2 2 mical, water utilities, and other industrial facilities. 11 12. . Chinese enterprises overseas project market development() Project contracting market in Africa 12 13. () Project contracting market in Africa 1. Market development in Africa The current situation in Africa has had gratifying changes. There is less tension in African countries, and the political environment has become more and more stable. African economies have achieved the desired growth targets to accelerate regional economic integration, and the pursuit for stable development have become the major trend in Africa. As the global economy has begun to recover, the demand for African minerals and raw materials is increasing. Particularly the rapid growth of the national economy of China, India and Brazil as well as other emerging economies, will contribute to the acceleration of economic development in Africa. African economic growth is expected to reach 5% in 2010, at which it will surpass Europe (1.5%) and the United States (2.5%). According to IMF (International Monetary Fund) statistics, from 2000 to 2010, the African economic growth rate was higher than that of Brazil and India; from 2010 to 2015, the African economy is expected to reach an average annual growth rate of more than 6%, surpassing the growth rate of Brazil.13 14. () Project contracting market in Africa 1. Market development in Africa The rapid and stable development of the economy provides favorable conditions to build infrastructure in African countries including Algeria, Nigeria, Equatorial Guinea, Angola and more. The contracts include development project in roads, housing, utilities, and other infrastructure. 14 15. () Project contracting market in Africa 2. China-Africa relationsChina-Africa relations have lasted for half a century. The strong relationshiphas paved the way for economic and trade cooperation between China andAfrica, while greatly promoting cooperation in project contracting .In1971, with the1956, Chinasupport of allies In 2000, China-established in Africa, China Africadiplomatic resumed Cooperationrelations membership inForum waswith Egyptthe UN founded In late-1963 to InIn 2006, the early 1995, Chinese China-Africa 1964, Premier President Jiang summit heldZhou Enlai visited Zemin visited in Beijing 10 countries in AfricaAfrica15 16. () Project contracting market in Africa 3. Chinese enterprises in Africa From 1970s to 1980`s , there were mostly self-financed projects. From1976-1985 project contracts signed between China and AfricanThe initial countries totaled to $1.131 billion, completed turnover was about $334stage million. From 1980s to 1990s: the four principles of China-Africa economiccooperation, "equality and mutual benefit, seeking practicalresults, diversity, and common development," were established. China Progressiveexperienced rapid growth in contracted projects in Africa. In 1994, thedevelopment establishment of Export-Import Bank of China provided support forstage more contracted projects in Africa. Also in 1994, new contractsbetween China and African countries amounted up to $715million, and complete turnover of $614 million. From 1990S to now: With the establishment of China-AfricaCooperation Forum, Chinese enterprises in Africa entered a new rapid Rapidgrowth stage. In 2009, Chinese enterprises in Africas market sharegrowth stagereached 36.6%, more than the sum of all other Europeancontractors, ranking first among all.16 17. () Project contracting market in Africa 4. Future cooperation between China and Africa(1) China-Africa economy and trade are highly complementaryAfrica is a continent with a large population, abundant resources and great potential for development, helping it to maintain rapid growth in recent years. China, on the other hand, has a huge market, extensive development experience, capital, technology and personnel that African countries need. Currently, a large number of strong and reputable Chinese enterprises are eager to "go out and invest in Africa(2) Great efforts to build infrastructure in AfricaAt present, Africa has and will invest large amounts of capital into infrastructure construction. In 2010 African Development Bank committed to financing $100 billion through various channels for infrastructure construction in African countries. African countries are already in planning stages.17 18. () Project contracting market in Africa South Africa announced it will invest $78 billion in infrastructuredevelopment, including energy, transportation, and housing Kenya announced it will issue bonds of $4.5 billion to raise financial resourcesfor infrastructure Nigeria plans to invest $ 8 billion in port construction and maintenanceupgrades Mauritius plans to invest $800 million for a large-scale improvement intransportation infrastructure Ethiopia has received a loan totaling $3.3 billion dollars from the AfricanDevelopment Bank for the construction of a connecting highway linkingKenya with Ethiopia. 18 19. () Project contracting market in Africa 4. Future cooperation between China and Africa(3) The advantages of Chinese enterprisesOver the past 50 years, China has been involved with 525 infrastructure projects inAfrican countries, and has established a high reputation due to the high level ofcooperation between Chinese and African firms. This has made Chinese enterpriseswidely recognized in African countries. The China-Africa Cooperation Forum has created favorable conditions for Chineseenterprises to cooperate with African countries. In 2006, the Beijing based China-AfricaCooperation Forum launched its campaign to continue developing Sino-African relations.In November 2009, the China-Africa Cooperation Forum was held in Egypt, and theChinese government launched a new program, designed to vigorously promotecooperation in infrastructure construction. Chinas economic support to Africa. The Chinese government is prepared to provide over$100 billion dollars in preferential loans to Africa, while increasing the overall financingcapacity of continent at large. It also will allow Chinese financial institutions to establish aspecial fund of $10 billion for SME development in Africa, while remit government interest-free loans and overdue debt relief that was scheduled to end in 2009.19 20. Contents I. Chinese enterprises overseas project marketdevelopment II. Chinas main project cases III. Current Chinese Overseas Engineering ProjectManagement Situation IV. Current International Project Management Features V. How To Manage Chinese Engineering Contractors 20 21. . Chinas main project cases () The world-class projects cases in China 1. The worlds largest hydropower project - the Three Gorges Dam 2. Shanghai Jinmao Tower 3. The worlds highest and longest plateau railway - Qinghai-Tibet Railway () Chinese Contractors Remarkable Projects in International Market 1. Venezuelas Northern Plains Rail System (Tinaco to Anaco rail section) 2. COCA CODO-SINCLAIR Hydropower Project in Ecuador 3. Universal Studios Singapore () Chinese Contractors Remarkable Projects in Africa 1. Highway projects Algeria East-West Highway Project Highway project from Addis Ababa to Adama in Ethiopia 2. Railway projects Railway Modernization Project in Nigeria 3. Water conservation and hydropower Sudan Merowe Dam Tekeze Hydropower Station in Ethiopia 4. Housing project Algeria International Conference Center Social housing project in Angola 21 22. . Chinas main project cases() The world-class projects cases within China22 23. () The world-class projects cases in China1. The worlds largest hydropower project - the Three Gorges Dam General Contactor: CGGC (assumed 70% of the construction task) Total investment: 203.9 billion RMB Construction period: 17 years Phase 1: 1993 1997 Phase 2: 1998 - 2003 Phase 3: 2004 2009 Project Description: Three Gorges Project is the worlds largest waterconservancy project, and is a world leader in stand-alone capacity, installedcapacity, annual energy output, project size, and metal structure. 23 24. 24 25. () The world-class projects cases in China2. Shanghai Jinmao Tower General Contractor: Shanghai Construction Engineering Group Project Size: The Shanghai Jinmao Tower project covered and area of290,000 square meters, 91 floors, and stood over 420 meters tall. Total Contract Amount: 5 billion RMB Construction period: May 1994 -March1999 Project Profile: The Jin Mao Tower is located in Shanghais Pudongdistrict, a Lujiazui Finance and Trade Zone beside the Huangpu River. TheJin Mao tower is over 420 meters tall, and is the third highest the skyscraperin both Shanghai and China and is the 8th tallest in the world. Constructionbegan in 1994, and was completed in1998. 88 floors are above ground, andwhen coupled with the lobby and basement it increases to 93. The tower has130 lifts and 555 rooms. It has been become a landmark of Shanghai, andhas evolved into a modern office building, five-star hotel, conventioncenter, entertainment complex, and shopping mall. It is a true blend ofChinese and Western construction techniques, and is a multifunctionalskyscraper. 25 26. () The world-class projects cases in China3. Qinghai-Tibet Railway General Contractor: China Railway Group Limited Total length: 1956 kilometers. A high altitude project, over half of theQinghai-Tibet railway was built at an elevation 4000 meters above sealevel, with its highest point reaching 5072 meters. Total contract amount: 33 billion RMB Construction period: Phase 1: sub-project construction started in 1958,May 1984 section was opened to traffic Phase 2: Began June 2001 and was completed by July 2006 Project Description: The Qinghai-Tibet Railway is one of Chinas fourmajor projects in the 21st century, and is a milestone that marks theimplementation of a Western development strategy. This railway links eastof Xining, Qinghai with west of Lhasa, Tibet. The Qinghai-Tibet Railway isthe worlds highest and longest plateau railway26 27. . Chinas main project cases() Chinese Contractors Remarkable Projects in International Market 27 28. () Chinese Contractors Remarkable Projects inInternational Market1. Venezuelas Northern Plains Rail System (Tinaco to Anaco rail section) General Contractor: China Railway Engineering Corporation (July 30, 2009 signed a general construction design contract) Total contract amount: $7,500,000,000 Size of project: Total length of 471.5 km, running through four states in northern Venezuela: Cojedes,Guarico,Aragua,Anzotegui.The railway is designed to double electrification and operate at speeds in excess of 220 km/h. Construction period: 40 months, is expected to be completed in 2012 Project portfolio: To date, this is the largest contract signed by Venezuela, and is also the largest overseas railway construction general contract that Chinese enterprises have successfully bid upon. 28 29. () Chinese Contractors Remarkable Projects inInternational Market2. COCA CODO-SINCLAIR Hydropower Project in Ecuador General Contractor: China Hydropower Construction Group Contract amount: $2.3 billion Construction period: 66 months Project profile: The total installed capacity of COCA CODO-SINCLAIR Hydropower station is 1.5 million kilowatts. It has the largest amount of foreign investment and is the largest hydropower project in Ecuador. Its annual generating capacity is 8.8 billion kWh. When complete, the project will meet one-third of Ecuadors populations electricity demand.29 30. () Chinese Contractors Remarkable Projects inInternational Market3. Universal Studios Singapore General Contractor: China Jingye Engineering Co., Ltd. Total contract amount: $1 billion Construction period: 18 months, from August 2008 to March 2010 Project Profile: Universal Studios Singapore is a Worlds flagship project, costing nearly $4.4 billion to build its Sentosa Resort. Universal Studios covers an area of 20 hectares , and the construction cost is over $1 billion. The park is designed to accommodate up to 30 thousand peoples per day. It is the fourth Universal theme park worldwide, and the first Universal Studios park in Southeast Asia. Jingye Co.,Ltd. was able to overcome the problems associated with working in high-temperature heat and rainy weather. The project featured 24-hour non-stop construction, and utilized a number of new technologies, new processes and new materials during both the design and construction process. 30 31. . Chinas main project cases() Chinese Contractors Remarkable Projects in Africa 1. Highway project Algeria East-West Highway Project ;Highway project from Addis Ababa to Adama in Ethiopia 2. Railway projects Railway Modernization Project in Nigeria 3. Water conservation and hydropower Sudan Merowe Dam Tekeze Hydropower Station in Ethiopia 4. Housing project Algeria International Conference Center Social housing project in Angola31 32. () Chinese Contractors Remarkable Projects inAfrica1.Chinese Highway Projects in Africa 32 33. () Chinese Contractors Remarkable Projects inAfrica(1) Algeria East-West Highway Project General Contractor: Joint Venture between CITIC Group and China Railway Construction Corporation Contract Amount: $6.25 Billion Project size: 1216 kilometers Construction Period: 40 months Project Profile: The Algeria East-West Highway project is divided into 3 sections: Eastern, Central, and Western. The project is to design a two- way, 6-lane highway that allows for high-speed travel. This project is the largest example of an exchange of international tenders since the founding of the Peoples Republic of China in 1949. This project also marks the first time European specifications and standards have been successfully followed by a Chinese overseas contractor utilizing mainly Chinese labor and equipment. 33 34. () Chinese Contractors Remarkable Projects inAfrica(2) Highway project from Addis Ababa to Adama in Ethiopia General Contractor: China Communication Construction Company Limited Contract amount: $709 million Construction period: June 2010-May 2014 Project profile: The projects design length is 79.6 km. It is a full interchange highway of six full closed and two-way lanes. This project is based on Chinese road standards and designs. The project is the first expressway in Ethiopia, and when complete, it will greatly improve transportation conditions in Ethiopia. 34 35. () Chinese Contractors Remarkable Projects inAfrica2.Chinese Railway Projects in Africa35 36. () Chinese Contractors Remarkable Projects inAfrica Railway Modernization Project in Nigeria General Contractor: China Civil Engineering Construction Corporation Contract amount: $8.3 billion Construction period: 2006 - 2015 Project Profile: The Railway Modernization Project in Nigeria constructs ofa two-lane standard gauge railway from the southern city of Lagos to thenorthern city of Kano. The railway is 1315 km long and is design for speedsup to 150 km/hour. The project contract amounts to $8.3 billion. This capitalis funded by a $10 billion low-interest soft loans provided by the Export-Import Bank of China. China Civil Engineering Construction Corporation isresponsible for the entire project including design, procurement, andconstruction. This is the largest international engineering contracting projectthat Chinese enterprises have contracted. 36 37. () Chinese Contractors Remarkable Projects inAfrica3.Chinese Water Conservation and Hydropower Projects in Africa37 38. () Chinese Contractors Remarkable Projects inAfrica(1) Sudan Merowe Dam General Contractor: A consortium of Chinese international water and electric corporations and Sinohydro Corporation Contract amount: $1.6 billion to $1.8 billion Construction period: 2003 2009 Project profile: Merowe Dam is 9.7 km in length. It is the longest dam in the world. It is located 350 km north of Khartoum, the Sudanese capital. Merowe Dams functions include power generation and irrigation. It has a capacity of 12.45 billion cubic meters, and total power installed capacity of 1.25 million kilowatts, which is more than 2 times the existing installed capacity in Sudan. It has an irrigation area of 100 hectares, thus benefitting 400 million Sudanese.38 39. () Chinese Contractors Remarkable Projects inAfrica (2) Tekeze Hydropower Station in Ethiopia General Contractor: Sinohydro Corporation and CGGC Contract amount: $224 million Construction period: 5 years Project Profile: Tekeze Hydropower Station in Ethiopia is an important project for the economic development and the improvement of living conditions in Ethiopia. Tekeze Hydropower Stations functions include water conservation, power generation, irrigation, and more. It is the largest hydropower station in the country and is commonly referred to as Ethiopias "Three Gorges Project." The project installed 4 power units of 75,000 kilowatts, with a total installed capacity of 30 million kilowatts. Its is 188 meters in height, making it Africas highest thin arch concrete hyperbolic. After the station was completed, the total installed capacity of Ethiopia increased nearly 30%, greatly contributing to Ethiopias economic development.39 40. () Chinese Contractors Remarkable Projects inAfrica4.Chinese Housing projects in Africa40 41. () Chinese Contractors Remarkable Projects inAfrica(1) Algeria International Conference Center General Contractor: China Construction Group Contract amount: 50 billion RMB Construction period: 31 months Project Profile: Algeria International Conference Center building covers 230,000 square meters. It is composed of a 600-person lecture hall, 600- person conference room, 300-person representative hall, 15,000 square meters exhibition hall, separate meeting areas, national and head areas and a large number of auxiliary buildings. It can hold up to 20,000 people.41 42. () Chinese Contractors Remarkable Projects inAfrica(2) Social housing project in Angola General Contractor: CITIC Group Guohua Company Total Contract Amount: $3.5 billion Project size: 20 apartments, 24 kindergarten schools, 9 primary schools, 8 secondary schools and one water pump station producing 40,000 tons of water per day and one sewage treatment plant capable of processing 3.5 million tons of waste per day. 2 60KV/15KVsubstations, 13 switching stations, 77 substations, and water supply systems, sewage systems, drainage systems, traffic signal systems, electrical systems, communication systems, roads and other infrastructures Construction period: 38 months Project Profile: The Angola social housing project uses EPC/turnkey project control, and the owner is the Angolan government reconstruction committee, and CITIC Group Guohua is the licensed general contractor.42 43. Contents I. Chinese enterprises overseas project marketdevelopment II. Chinas main project cases III. Current Chinese Overseas Engineering ProjectManagement Situation IV. Current International Project Management Features V. How To Manage Chinese Engineering Contractors 43 44. . Current Chinese Overseas Engineering Project Management Situation() Evaluation of Existing Management() Main Advantages of Chinese Contracting Companies() Main Challenges of Chinese Contracting Companies 44 45. Evaluation of Existing ManagementAfter 20 years of overseas expansion, China has made remarkableachievements in engineering project management including thefollowing1. Achieved excellent engineering performance2. Achieved engineering contract diversification3. Established organizations compatible with general contracting function4. Established general contracting project management system5. Achieved advanced project management skill among select enterprises6. Trained a great number of project management professionals 45 46. . Current Chinese Overseas Engineering Project Management Situation() Main Advantages of ChineseContracting Companies46 47. Main Advantages of Chinese Contracting Companies1. Cost-price advantage (1) MaterialsFull range of cost-effective materials from China such as electronicaccessories, steel, furniture, etc. The materials can meet Europeanstandards and have significant price advantage. (2) Human resourcesAbundant human resources with high efficiency and skilled expertise (3) EquipmentProvision of cost-effective engineering equipment set. Chineseequipment has capital, labor, technology intensive characteristics, highperformance-low cost, and more applicable to many developing countriesin Asia and Africa. 47 48. Main Advantages of Chinese Contracting Companies2. Skill and Management Advantages(1) Professional skills: Experienced in hydropower, roads and bridges, housingconstruction, etc.; Advanced technical level in international projectsFor example, Chinese enterprises have built the worlds largest steelreinforced concrete dam; the worlds highest railway(5, 072m above sealevel); and various other world-class engineering projects(2) Skilled workers: Professional skills and highly efficient(3) Management level: Technology output and management-intensivecombination significantly enhances the management level.(4) Diligently promote localization of management 48 49. Main Advantages of Chinese Contracting Companies 3. Financial Advantage (1) Strong Self-funding Capability Most of Chinas contracting companies are state own enterprises or private enterprises with strong financial capacity, allowing them to undertake large projects. In 2009, 50 Chinese enterprises were selected into the list of ENRs worlds top 225 largest international contractors", the total turnover increased about 57.1%, accounting for 9.15% of total turnover of 225 enterprises China has the fourth most contracting companies in the ranking among all nations. There are 16 total Chinese companies in the top 100 contracting companies.The number of Chinese enterprises to enter the ENR The world s largest international contractors 47474949 49515054 3943 33 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201049 50. Main Advantages of Chinese Contracting Companies(2) Strong Financing Capability:China has abundant capitalThe proportion ofreserves, meaning Chinas banks can China`s capital in totalprovide long-term and low-cost credit tender`s amountfor overseas projectsChinas capital Others(3) Chinas Abundant Foreign ExchangeReserves:28%Chinas foreign exchange reservesreached to $ 2.454275 trillion US 72%dollars in June 2010. This can providea solid economic foundation for Chinasoverseas engineering contracts. 50 51. Main Advantages of Chinese Contracting Companies4. Policy advantage (1) Going out" StrategyFrom "going out" special funds to the loan interest subsidy and othersubsidies, China intensively issued a series of policies in the short termto support enterprises in "going out. These policies provide greatsupport for companies that are developing overseas. (2) Support PolicyChinas export tax rebate policy significantly reduces the cost ofprocurement of materials, equipment, etc. from China, and enhancesChinas competitiveness in overseas contracting projects for Chinesecompanies51 52. Main Advantages of Chinese Contracting Companies4. Policy advantage (3) National Industrial Position: The industry position of developed countries such as Europe and the United States are based mainly on innovation, core technology products, and capital goods such as machinery tools, equipment, etc. China relies on vast labor and reserves of its economy, primarily in exports and external investments.(4) Cooperative relationship Cooperative relationships between China and its neighboring countries allows China to maintain a deep and friendly relationship with third world countries in Asia and Africa. 52 53. Main Advantages of Chinese Contracting Companies5. Emotional and cultural advantages (1) Hold strong political relations (2) Share common goals with developing countries (3) Cooperate effectively to achieve win-win situation and harmony (4) Hold national spirit 53 54. . Current Chinese Overseas Engineering Project Management Situation() Main Challenges of ChineseContracting Companies54 55. Main Challenges of Chinese Contracting Companies1. Non-rational tender (1) Lower cost and lower bidding price lead to heavy competition. (2) If price is too low, competitive bidding is not considered sufficient, thus leading to increased risk. (3) Underestimation of the auction items and their strength.55 56. Main Challenges of Chinese Contracting Companies2. Prices increase(1) Raw material prices increase such as cement, steel, etc.International market demand for steel increases and steel prices continue to rise (2) Increased labor costs (3) Appreciation of RMB and domestic procurement costs,and increase in exchange rate risks56 57. Main Challenges of Chinese Contracting Companies3. Communication problems(1) Linguistic capacity CaseProject Management conflicts(2) Communication rules and skills CaseMinutes of Meeting(3) Familiarity with local culture and customs CaseAttire, Company Email 57 58. Main Challenges of Chinese Contracting Companies4. Regular Standards (1) Chinas standards lack foreign language versions (2) Promotion of Chinas standards is not sufficient and is not recognizedoverseas (3) China need to improve company standards (4) Chinese enterprises have failed to fully converge with international standards58 59. Main Challenges of Chinese Contracting Companies5. Different management systems (1) Organization and project management systems are different (2) Cannot fully integrate with the international management system (3) Project management team is too centralized (4) Lack of regional headquarters 59 60. Main Challenges of Chinese Contracting Companies6. HSE awareness, social responsibility, and brandawareness are lacking (1) Lack of knowledge of HSE, level of HSE is insufficient (2) Safety standards needs to be improved (3) Social responsibility needs to be strengthened (4) Lack of awareness for brand importance, lack ofexperience to promote own competitive advantages andcharacteristics60 61. Main Challenges of Chinese Contracting Companies7. The main problems in management26 26 25221818 17 17 17 16 16 Based on the survey of 30 Chinese engineering contractors on 8 July 2010 61 62. Contents I. Chinese enterprises overseas project marketdevelopment II. Chinas main project cases III. Current Chinese Overseas Engineering ProjectManagement Situation IV. Current International Project Management Features V. How To Manage Chinese Engineering Contractors 62 63. . Current International Project Management Features () Integration () Standardization () Specialization () Information () Internationalization 63 64. . Current International Project Management Features () Integration 1. In the past 5 years, Chinas international project contracting business volume isequivalent to the total volume in the past 20 years. The overall annual growth rateis 30% , while the ranking is also rising; 15 times in the last 15 years 2. In 2009, international projects undertaken by Chinese contractors amount to morethan $50 million US dollars, constituting 51% of total bids and 94% of totalcontracts 3. In 2000, there were 9 total projects valued over $100 million US dollars; in2009, there were 240. 4. There are relatively more EPC and the D & B projects (more than half of the totalprojects). The average project value of the first half of 2010 reached $483 millionUS dollars, and in 2009 was $324 million US dollars.Year200420052006 200720082009Turnover of Chinas internationalcontracted projects ($100 million 174.7 217.6 300406 566 777 US dollars)64 65. . Current International Project Management Features() Standardization 1. Procedures 2. Forms 3. Regulations 4. Information 5. Training65 66. . Current International Project Management Features () Specialization1. Professional Software e.g. Primavera, @Risk, Project etc.2. Subcontract team and service team specializationCase3600T Crane3. Each link connecting closely and directly4. The application of professional management techniques5. Refine specification of inner workControl, contract, design, quality, procurement, construction, HSE, labor, testing, coordination, Document Control and othersDon`t match of Professional division of labor become an progress obstacle of manyenterprises.CaseThe Organization chart of an construction project in Australia.66 67. . Current International Project Management FeaturesCase Owners TeamEPCM Team571 PositionsThe Organization chart of an construction project in Australia.67 68. . Current International Project Management Features () Informatization1. Full use of network e.g. MSN, Aconex, Email and Variety of network platforms.2. Rapidly in responseCaseContract Termination NoticeFocal Point3. Orderly distribution Appropriate for integration of general understandingand precise control.68 69. . Current International Project Management Features () Internationalization 1. Labor International Labor 2. Material Global Procurement 3. Management Consulting Company 4. Finance, Exchange Rate and Taxation69 70. Contents I. Chinese enterprises overseas project marketdevelopment II. Chinas main project cases III. Current Chinese Overseas Engineering ProjectManagement Situation IV. Current International Project Management Features V. How To Manage Chinese Engineering Contractors 70 71. . How To Manage Chinese Engineering Contractors() Pursuit of sustainable development() Give up low price tender strategy() Standardized project management method() Adopt flexible and realistic standards and management methods() Strengthen management of project implementation phase() Choose high-quality consulting company and cultivate localizedmanagement talent() Guide localization of Chinese engineering contractors() Improve professionalism of Chinese contractors() Provide the necessary support and assistance to the Chinese engineeringcontractors() Maintain a stable political environment and prepare adequate financialresources71 72. . How To Manage Chinese Engineering Contractors() Pursuit of sustainable development 1. Planning of infrastructure system should be swift, but the implementation can be conducted step by step 2. Design is the source of the whole project and must be controlled with high standards and high quality construction, refined details argument and control 3. Protect eco-environment 4. Pay attention to facilitys humanization72 73. . How To Manage Chinese Engineering Contractors()Give up low price tender strategy1. Difficult to ensure project quality and safety2. Influences on-schedule project completion3. Leads to operating phase investment increase by the owner4. Promotes construction companies to make poor decisions byincreasing changes5. Corrosive to a clean and honest construction administration. 6 Hinders the healthy development of the entire construction industry 73 74. . How To Manage Chinese Engineering Contractors() Standardized project management method1. Adopt cross-border operation and international management of large-scale projects2. Specify and refine the specification of work Including design, construction, procurement, contract, HSE, quality, document control, etc.3. Make use of advanced softwareSuch as Primavera, @ Risk, Exp, and other software to make project management more efficient4. Improve the use of information and make full use of network resources Such as Aconex, email and various network platforms5. Introduce high-quality consulting firms into China and train owners and contractors6. Focus on audit of contractor organization and management 74 75. . How To Manage Chinese Engineering Contractors() Adopt flexible and realistic standard and managementmethods1. Adopt Chinese standards(1) After 30 years of development, Chinese standards have formed a completeset of engineering and technical specifications(2) Chinas engineering and technical specifications are self-contained byreference to Western standards, covering all areas of engineering. Its levelare not lower than or higher than the standard level in Europe and US. Forexample, Chinas pier standards v. U.S. pier standards(3) The English text version of Chinese standard will be available soon and iscommitted to being promoted globally(4) Chinese standards and specifications can ensure the quality of the project(5) Chinese managers and practitioners have become more familiar withChinese standards, therefore project management and implementation hasbecome more smooth 75 76. . How To Manage Chinese Engineering Contractors() Adopt flexible and realistic standards and managementmethods 2. Appropriate use of Chinese materials; quality control of materials 3. Adopt Rewards and Incentive System 4. Properly consider profit sharing 5. Introduce competition mechanism into China 6. Reduce management process 76 77. . How To Manage Chinese Engineering Contractors() Strengthen management of project implementation phase 1. Determine reasonable project period 2. Enhance communication with the contractor 3. Take positive measures to prevent and respond to risks 4. Pay attention to details of the contract; increase depth of the contract; strictly determine the scope of the contract; reduce variations and unforeseen factors 5. Process variations claim in time when variation matters occur 6. Strictly supervise subcontractor management 77 78. . How To Manage Chinese Engineering Contractors()Choose high-quality consulting company, cultivatelocalized management talent1. Communicate with Chinese organizations, find high-quality consulting firms, manage Chinese with Chinese. For example, a Chinese project management firm in international project management(1) From the language factor, they can fully communicate with the owner and theChinese contractor(2) From the management factor, they are familiar with both Western and Chineseproject management concepts and thus can manage more effectively2. Hire professional supervision teams(1) Familiar with local legal requirements(2) Familiar with local customs78 79. . How To Manage Chinese Engineering Contractors()Choose high-quality consulting company, cultivatelocalized management talent3. Strengthen training of the management team and construction team for going abroad4. Demand the management company and main contractor to train local staff5. Cultivate localized talents and arrange acceptable training of talents in the management company or in the main contractor company79 80. . How To Manage Chinese Engineering ContractorsQuality: good personal qualities, positive teamattitude, pursuit of excellence, be respectfulInformation Quality Habits: responsible work habits, smooth functioning of theteam, maintain high level of work efficiencyThinking: clear thinking is a fundamental condition of aProcedureHabits good project managerProfessional: appropriate division of labor, make full use offavorable conditions and promote complementarities; Professional Thinkingeverybody can be a talentProcedure: in modern management one must followprocedures to improve program managementInformation: appropriate and adequate information sharingcontributes to the teams efficiency Six SupportingPoints 81. . How To Manage Chinese Engineering Contractors()Guide localization of Chinese engineering contractors1. Help Chinese contractors establish stability offices in local area2. Encourage Chinese contractors in achieving localization of humanresources3. Strengthen the communication with the Chinese contractorsoverseas offices4. Guide Chinese contractors to understand and respect local customs81 82. . How To Manage Chinese Engineering Contractors()Improve professionalism of Chinese contractors1. Increase their self-regulation level2. Cultivate a good sense of time and improve work efficiency3. Emphasize commitment and promise4. Act in accordance with contractual specifications5. Familiar with international business and cultural etiquette82 83. . How To Manage Chinese Engineering Contractors() Provide the necessary support and assistance to theChinese engineering contractors1. Establish a win-win concept and enhance service awareness2. Provide necessary assistance to labor input Such as: visa processing3. Assist the contractor to complete the necessary approvals4. Assist contractors to adapt to local environment in a timely manner5. Help speed up the rate of cash flow 83 84. . How To Manage Chinese Engineering Contractors()Maintain a stable political environment and prepareadequate financial resources1. Stabilize political environmentFor example, political controversy may affect the progress of the project 2. Maintain policys continuity 3. Establish clear decision-making systems and institutions 4. Prepare adequate financial resources and make use of Chinas financialadvantages 5. Rationally use resources to enhance operational capacity of capital 6. Process payments in a timely manner 84 85. Questions & Discussion Questions & Discussion 85