Nguyễn Văn Tâm Bsc 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 Airport Cantho 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 Private contractors Public contractors

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 Decree (Clause 32 of Decree 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 2 Claim settlement: Analysis for additional cost Analysis for additional time Objective 3 Study Claim attitude of contractor and owner Scope of study Vietnam Mekong area Public sector Building 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

INPUT DATA COLLECTION, ANALYSIS OUTPUT Identification of Claims Causes, Settlement and Attitudes 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 LITERATURE 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 List of Claims sources, Settlement and Attitude PROJECT SELECTION - 3 Projects of public contr. - 3 projects of private contr. Claim causes Relationships’ causes Claim causes Claim analysis Claim attitudes Ranking claim causes Claim attitudes Expert Discussion Interview 6 Participants Observation - 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 Methodology

Objective 1: Identification Claim Causes Objective 1 Identification 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 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%

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. 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 Causes Caused by Group Total delay time (days) Percent Design changes by mistakesDesigner % Mistakes during constructionContractor % Additional works by ownerOwner % Delay or DisruptionContractor % Defective works and reworksContractor % Low productivityContractor % Inspection of completed worksConsultant % Unforeseen site conditionsExternal652.08% Price fluctuationsExternal551.76% 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 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) Adding cost factorGroupsClaim Amount (VND)Percentage of Claims Design changes by mistakesDesigner9,437,909, % Price fluctuationsExternal7,408,428, % Additional works by ownerOwner6,926,039, % Unforeseen site conditionsExternal5,239,300, % Inaccurate estimatesDesigner2,420,273, % Causes of Cost overrun: Competence of Designer, small scale consultant firms Owner 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 works Price fluctuations Designers’ inadequate experience and capability Shortage of equipment Low productivity Inappropriate construction methods Bad weather Unclear 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 2 Claim 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