Dissertation cost management in vietnam large construction projects

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Dissertation

Cost management in Vietnam large construction projects

Table of content

Chapter 1. INTRODUCTION ....................................................................................................... 3

1.1 Research Background .................................................................................................. 3

1.2 Research Objectives ..................................................................................................... 4

Chapter 2. LITERATURE REVIEW ............................................................................................ 5

2.1 Project and Project Management ................................................................................. 5

2.1.1 Project Investment ......................................................................................................... 5

2.1.2 Project Management ...................................................................................................... 6

2.1.3 Content of project management ..................................................................................... 8

2.2 Construction Project Management ............................................................................. 18

2.2.1 Construction project ..................................................................................................... 18

2.2.2 Construction project management ............................................................................... 18

Chapter 3. METHODOLOGY .................................................................................................... 19

3.1 Research Strategy....................................................................................................... 19

3.2 Research Paradigm and Design ................................................................................. 19

3.2.1 Qualitative research ..................................................................................................... 19

3.2.2 Quantitative research ................................................................................................... 19

3.3 Data Collection .......................................................................................................... 19

3.4 Data Analysis ............................................................................................................. 19

Chapter 4. Results and Discussions ............................................................................................. 20

4.1 Respondent’s profile .................................................................................................. 20

4.2 Empirical Results ....................................................................................................... 20

4.2.1 Ranking of Factors ....................................................................................................... 20

4.2.2 Spearman’s Rank Correlation ....................................................................................... 24

4.2.3 Factor Analysis ............................................................................................................ 25

Chapter 5. Conclusion ................................................................................................................. 27

Reference Error! Bookmark not defined.

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Chapter 1. INTRODUCTION

1.1 Research Background

Vietnam has seen a speedy growth rate of the economy in recent time (Sharkey, 2012).

Together with that economic growth rate, the development of infrastructure and the process

of the urbanization are considered to be considerable booms. Added to this, there is an

increasingly important role of the construction industry for domestic economy (Ling et al.,

2009; Le et al., 2010). According to GSO (2011), the amount of capital spent on construction

sector has achieved the value of 13,202 billion VND, and that sector has made great

contributions to the level of GDP (Gross Domestic Product) at 53.276 billion VND (GSO) in

2005 (1$USD = 20,900 VND). Nevertheless, the implementation process of the construction

projects has faced several issues, and beside these issues, there are two considerable problems,

namely delay and cost overruns (Ling and Hoang, 2010; Nguyen et al., 2007; Nguyen et al.,

2004). Due to the two above-mentioned problems, the frequent effects could possibly be the

failures of the projects, the decline of profit margin, and the unbelief of the people in the

Governmental funded projects.

Therefore, the study has been performed and carried out in order to figure out the main

reasons of two problems, namely delay and cost overruns in the construction phase of

Vietnamese construction projects. The reasons related to the time and cost extension can stem

from different periods of the projects, the works, and the circumstances; however, the main

problems often result from the construction phase.

There has been a dramatic development of construction projects in Vietnamese market

since 2000, and thus, the study can just focus only on some large construction projects in

Vietnam. Giving an exact definition of large construction projects seems to be pretty hard and

therefore, in the study, it is referred to Nguyen et al. (2004) about the definition of large

construction projects. In this study, the definition of a large construction project is related to

the project with the total budget of more than one million USD.

1.2 Research Objectives

The study will mainly focus on the construction phase of the projects. And the purposes of

the study will be:

To define and classify the reasons of the delay and cost overrun in the context of

their occurrence and their extent of severity as well as check the significance of the

reasons of the delay and cost overrun.

To test strong combination among the ranks of the respondents as well as to reveal

the basic existent interconnection of these above-mentioned reasons according to

the extent of their occurrence.

To make a comparison between Vietnamese conditions and several selected

nations.

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Chapter 2. LITERATURE REVIEW

2.1 Project and Project Management

2.1.1 Project Investment

Source: Chen et al. (2011)

Figure 2-1Cycle of an investment project

Table 2-1 Project constraints

Project condition Prior constraints

Difficult conditions Project expense

Plan satisfaction and guarantee of enterprise

development. Performance, quality or service

Urgent requirements, importance of competition Time

Importance of the safety Technical standards

Source: Long and Ohsato (2008)

2.1.2 Project Management

Source: Adams and Barnd (2008)

Figure 2-2 Project Cycle

Table 2-2 Trade-off situations

Situation Symbol Time Cost Completion

A

A1 Fixed Change Change

A2 Change

Fixed Fixed

A3 Change Change Fixed

B

B1 Fixed Fixed Change

B2 Fixed Change Fixed

B3 Change Fixed Fixed

C

C1 Fixed Fixed Fixed

C2 Change Change Change

Source: Chen and Tsai (2011)

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Source: Xu et al. (2012)

Figure 2-3 Relationship among three objectives: time, cost, and result

A. Characteristics of project management

Table 2-3 Basic differences between production management and project management

Process of production management in line Project management

The task is repetitive and continuous. The task is not repetitive and continuous but it

is new and changeable.

The level of human resource is low. The level of human resource is high.

A large number of products and services are

produced in one period (serial production).

It focuses on one kind or a certain number of

products and services (single production).

The existence of the companies and the enterprises

is long. The existence of the project is limited.

The statistics are available and useful for decision-

making.

The statistics are not much and thus, they are

not used for decision-making.

It does not cost much when fixing the mistakes. Wrong decisions cost too much.

Holding by the group is popular. There is new recruitment for each project.

The responsibility is obvious and adjusted through

time.

The division of responsibility changes based on

the nature of each specific project.

Working environment is relatively stable. Working environment has frequent changes.

2.1.3 Content of project management

Table 2-4 Content of project management

Project management

Overall plan Scope management Time management

Planning Scope identification Job identification

Plan implementation Planning Time estimation

Change management Scope change management Progress management

Cost management Quality management Human resource management

Resources planning Quality assurance planning Salary and labor planning

Cost calculation Quality assurance Recruitment and training

Estimation Quality management Team development

Cost management

Information management Supply, trade management Project risk management

Information management planning Supply planning Risk identification

Establishment of information

distribution channels

Choice of the contractors

and bidding management Risk assessment

Progress report Contract management and

supply progress

Program planning for investment

risk management

Table 2-5 Project planning management

Integration management

Plan development Plan implementation Control the entire change

Input Input Input

Output of other plans Project plan Project plan

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Information of similar projects Support documents Implementation report

Implementation strategy Project implementation strategy Change requirement

Limited factors Action programme

Assumptions

Tools and techniques Tools and techniques Tools and techniques

Project planning method General management skills Change control system

Knowledge and skills of relevant parties Knowledge, skills, and products Supervision management

Project management information system The order of implementing the

tasks of the project Implementation evaluation

Organizational procedures Support planning

Project information system

Output Output Output

Project planning Work results Up-to-date project plan

Support documents Change requirement Action programme

Lessons learned

Table 2-6 Project scope management

Scope management

Start Scope management Scope identification

Input Input Input

Product description Product description Project scope report

Strategy planning Implementation decision Limited factors

Project selection criteria Limited criteria The assumptions

The market of the project The assumptions The output of other plans

The information of similar

projects


Project selection methods Product analysis Division structure of the previous

similar projects

The assessment of the experts Cost/interest analysis Project division methods

The selection of the options

The evaluation of the experts.


Implementation decision Project scope report Project division structure

The decision of project

management director Support documents

Limited factors Project scope management plan

The assumptions

Scope inspection Scope change inspection

Input Input

Work results Project division structure

Product profile Change requirement and implementation report

Scope management plans

Tools and techniques Tools and techniques

Inspection

Project change management system

Implementation evaluation

Support plans

Output Output

Official acceptance The change in project scope

Action programme

Lessons learned

Table 2-7 Project time management

Time management

Activities identification Activities arrangement Estimated execution time

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Input Input Input

Project division structure List of activities List of activities

Project scope report Product description Assumptions, human resource

requirement

The information of similar projects The order of implementing

compulsory work The availability of resources

Binding factors and assumptions External influential factors The information of the previous

projects

Binding factors and assumptions


Project division Activity on node (AON) The evaluation of the experts

WBS of similar projects Activity on Arrow (AOA) General evaluation

Calculation methods of execution

time


List of activities Network diagram of the project Estimated execution time

Detailed support Up-to-date activity list Up-to-date activity list

Up-to-date project division

structure

Work schedule Project schedule control

Input Input

Network diagram of the project. Project implementation schedule, progress reports,

and change requirement of time management plan

Estimated execution time for each work and schedule

Resource requirements. Resource description

Limited factors and assumptions


Maths analysis, reducing execution time of the project Control system of the changes in implementation

schedules

Project management software The calculation of time deviation, and project

management software.

Output Output

Implementation schedule, time management schedule,

up-to-date required resources

Up-to-date implementation schedule, the adjustments

in the activities

Lessons learned.

Table 2-8 Project cost management

Cost management

Human resource management Estimated cost

Input Input

Structure of work divisions. Structure of work divisions

Similar information of the previous projects. Required resources.

Limit the scope Unit price, estimated time for each task

The description of required resources The information of similar projects

Implementation strategy


The evaluation of the experts Mathematic formula

The suggestion of many different options Excel software

Output Output

Required resources and the quantity Estimated cost

Supporting detailed calculations

Cost management plan

Budget draft Cost control

Input Input

Estimated cost Plan cost and financial statements

Work breakdown structure Change requirements

Project implementation schedule Cost management plan


Tools and techniques to estimate cost Cost change testing system

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The methods to determine cost deviation

Additional plans, foundation calculations

Output Output

Basis cost (initial cost plan) The estimation of adjustment cost

The recalculation of the budget.

The estimation of total project cost

Table 2-9 Project quality management

Quality management

Quality plan Quality assurance Quality inspection

Input Input Input

Product description Results of quality control

measurements Quality control plan

Standards and regulations Operational targets Identification of operational targets

Other output procedures

List of acceptance criteria


Cost/Benefit analysis Technical tools to manage quality plan Inspection, monitoring, and testing.

Standards The form of quality test Chart

Experiences

Trend analysis, cause and effect

analysis


Quality management plan Quality improvement Quality improvement

Identification of operational

targets Acceptance regulations

Acceptance list

Completing acceptance table as in the

list

Output of other procedures

Table 2-10 Human resource management

Human resource management

Organizational plan Recruitment Staff development

Input Input Input

Project interface Human resource description Personnel of the project

Human resource demand Documents on recruitment

instructions Project plan

Bindings

Human resources management plan

The report on using Human

resources

Comments from the outsiders


Similar projects Negotiation General management skills

Instruction documents Probation Arrangement and training

Organizational theory Recruitment

Analysis of the related parties


Human resource management

plan

Assignment of the personnel

in the project

Improvement of the criteria in using

human resources

Detailed diagram Guidance for the project team Input of performance evaluation of

using labour

Detailed supporting

Table 2-11 Information management

Information management

Relevant plans of the project Information distribution

Input Input

Required market demand Work results

Information technology and the bindings Information management plan

Assumptions


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Analysis of the related parties Informational skills

Information acquisition system

Information distribution system

Output Output

Management plan Project profile

Evaluation report End of the project in administration

Input Input

Project plan, work results Project evaluation documents

Other records of the project - Project product documents


Overview on the entire project organization Tools and techniques to make reports on

project implementation

Deviation analysis

Trend analysis

Additional value analysis

Tools and techniques for information

distribution

Output Output

Evaluation report Execution acceptance record

Change requirements Lessons learned

Table 2-12 Risk managemente

Risk management

Identification Risk measurement

Input Input

Outputs of other plans Risks acceptance of participating parties

Information of similar projects Risk resources and incidents which cause

risks

Cost estimation and time estimation


Brainstorm Expected monetary value

Cause and effect analysis Statistic summary

Interviews Decision tree

Expert’s evaluation

Output Output

Risk resources Opportunities against risk

Incidents which cause risks Opportunities for risks

Input of other procedures

Risk countermeasures Risk prevention control

Input Input

Opportunities against risks Risk management plan

Opportunities for risks Existing risky incidents

Defined risky incidents


The purchase the products and services The development of risk precautions

Limit plan

Prevention, insurance purchasing

Output Output

Risk management plan Editing activities

Input of the decisions Update additional management plan

Risk limiting plan Up-to-date addition for management plan

Commitment contract

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Table 2-13 Bidding management

Bidding management

Purchasing plan Plans to look for resources Seller analysis

Input Input Input

Product description Work list Purchasing documents

Purchasing sources Other output plans List of sellers

Purchasing conditions

Bindings and assumptions


Analysis and evaluation of

experts Standards Bidding

The options of contract forms Expert’s evaluation Advertising


Purchasing plan Purchasing documents Proposed plans

Work list Evaluation criteria

Up-to-date list of work

Selection of sources Contract management End of contract

Input Input Input

Proposed plans Work results Contract documents

Criteria to evaluate Change requirements

Project implementation

strategy Bill of sales


Contract negotiation Change testing system Inventory and purchasing

acconting

Payment system Sales report

Independent calculations Payment system


Contract Contract changes Contract documents

Payment request, exchange for

goods

Acceptance records of

contract liquidation

2.2 Construction Project Management

2.2.1 Construction project

2.2.2 Construction project management

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Chapter 3. METHODOLOGY

In the Chapter 2, the foundations related to the theory have been mentioned and the model

for doing research has been performed. And the Chapter 3 will introduce the research method

in order to make some adjustment to scales and examine research models and given

hypothesises. This chapter will contain two main parts: the first part will be the presentation

about research design, and the second part will represent scale of research definitions and the

adjustment of these definitions.

3.1 Research Strategy

3.2 Research Paradigm and Design

3.2.1 Qualitative research

3.2.2 Quantitative research

3.3 Data Collection

3.4 Data Analysis

Chapter 4. Results and Discussions

4.1 Respondent’s profile

4.2 Empirical Results

4.2.1 Ranking of Factors

Figure 4-1 Frequency index (F.I.) of listed causes

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Overall

Owner

Contractor

Consultant

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Figure 4-2 F.I. rank of listed causes

0

5

10

15

20

25

Overall

Owner

Contractor

Consultant

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Overall

Owner

Contractor

Consultant

Figure 4-3 Severity index (S.I.) of listed causes

Figure 4-4 S.I. rank of listed causes

0

5

10

15

20

25

Overall

Owner

Contractor

Consultant

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Figure 4-5 Importance index (I.I.) of listed causes

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Overall

Owner

Contractor

Consultant

0

5

10

15

20

25

Overall

Owner

Contractor

Consultant

Figure 4-6 I.I. rank of listed causes

4.2.2 Spearman’s Rank Correlation

Figure 4-7 Spearman’s Rank Correlation

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Spearman rank

correlation

coefficient

Significance

level

Spearman rank

correlation

coefficient

Significance

level

Spearman rank

correlation

coefficient

Significance

level

Frequency index Severity index Importance index

Owners – Contractors

Contractors – Consultants

Owners – Consultants

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4.2.3 Factor Analysis

Figure 4-8 Scree plot of factors

Figure 4-9 Total variance explained

0

10

20

30

40

50

60

70

Total % of Variance Cumulative % Total % of Variance Cumulative %

Component Initial Eigenvalues Rotation Sums of Squared Loadings

Series1

Series2

Series3

Series4

Series5

Series6

Series7

Figure 4-10 Factor analysis loading results

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Factors DC1

Factors DC2

Factors DC3

Factors DC4

Factors DC5

Factors DC6

Factors DC7

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Chapter 5. Conclusion

Through the analysis of questionnaire survey, the issues related to delay and cost overrun

in the construction stage have been defined and ranked based on varied opinions of

participating parties and three main index types. In general, there are five key reasons,

namely poor site management and supervision, poor project management assistance, financial

difficulty of owners, financial difficulty of contractors; design change. According to

Spearman’s rank correlation test, there is no disagreement among parties about the rankings

of these above-mentioned causes. Factor analysis has been used in order to classify these

causes into principal factors. Based on factor analysis, there are seven basic factors, including

Slowness and Lack of constraint; Incompetence; Design; Market and Estimate; Financial

capability; Government; and Worker. Comparing with other researches, the conclusion is that

developing world has to face similar concerns in their development progress. And two main

concerns are competency and finance.

Based on the above outcomes, the reasons related to delay and cost overrun of

construction projects mainly come from human problems as well as management weakness.

Therefore, it is essential and urgent to improve the abilities of managers and workers in VCI.

It requires greater demand for human resource training programs in construction field and

focuses on both quantity and quality. In the context of Vietnamese conditions, training

programs just focus on structure designs and pay less attention to planning, management, and

organization knowledge. It is necessary to stress on the feasibility of the projects and good

performance, especially for the Government-funded projects. Building and applying a

comprehensive mechanism with the combination between project feasibility, contractor

selection, and financial problems is of great importance to any project. Also, an appropriate

model for contractor selection as well as project type needs to be built in VCI. Besides, there

is one suggestion from this study that contract management be paid more attention. Despite

the decrees, circulars, or contract templates regulated by Vietnamese Government, the

experts and professionals should get involved in order to perform contract tasks or make

appropriate adjustments to realistic project conditions.

Through the conclusions of this study, the practitioners can understand more about the

influential impacts on project duration as well as project budget in the construction phase.

Taking the potential risks into consideration for current and future construction projects, the

participating parties in the project could minimize the problems related to delay and cost

overrun. These findings can become good references for both participants in VCI and those in

developing nations.

Further researches are needed in building practical models to assess schedule change as

well as cost change in order to match with VCI conditions. Currently, this part has

experienced the involvement of mathematical models and artificial intelligence models.

However, those models are still scattered and they haven’t got any appraisals. The outcomes

of this study could be considered as input variables in these models.

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