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Construction Management in Developing Countries, Lecture 5

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Construction Management in Developing Countries, Lecture 5, Project environment in developing countries, characteristics of project partners in Nepal, social, financial, legal and environmental issues in project environment in Nepal

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Construction Management in Developing Countries, Lecture 5

  1. 1. Chapter 5 Project Environment in Developing Countries (4 hours) 1
  2. 2. 2 Project Environment Construction Industry Environment Macro Environment Stakeholders Resources Culture/Practices Client (Public/Private) Consultants Contractors Suppliers CommunitiesSpecial Interest Groups Creditors/Donors Political Legal Forces Economic Forces Social Forces Technological Forces Government
  3. 3. Construction Industry Environment: Project participants Project participant s Client Gov/Pvt Funding agencie s/Donor s Contracto r Consulta nt Constructio n materials suppliers and allied industries 4
  4. 4. 1. Client Characteristics 1. Over politicized 2. Lack of finance 3. Corruption 4. Inefficient 5. Unaccountable 6. Frequently changing personnel 7. Frequently changing designs Private Client: 1. Low budget 2. Delay in payment 3. Design change Line Agencies: • DoR, DoI, DoLIDAR, DWSS/KUKL • DWIDP, DSCWM, … • NEA, NT, … Municipal corporations DDC, VDC Industries and other private constructions Private developers and real estates Attempts to address some of the negative aspects of the characteristics of Clients are e-bidding, e-governance, detailed specification, third party evaluation etc. Potential thesis topic: Specific problem identification and potential solution using SWOT Analysis 5
  5. 5. 2. Consultant  Consulting services started in 1960s  More than 500 consulting engineering and architectural firms  Society of Consulting Architectural and Engineering Firms (SCAEF) – 1990, SCAEF membership around 135  Provided services in Bhutan, Vietnam, Maldives, Afghanistan, China, India Potential thesis topic: Analysis of status of consulting industry in Nepal: problem identification and potential solution 6
  6. 6. 7
  7. 7. SCAEF Members (incomplete list)S.N. Members S.N. Members 1 Architects Collaborate (Nepal) Pvt. Ltd 39 Masina Continental Associate (P) Ltd. 2 Architects Module Pvt. Ltd 40 MEH Consultant (P) Ltd. 3 Arniko Designers & Planners (P) Ltd 41 Mentor Consultants (P) Ltd 4 Associations for Research & Management Services Pvt. Ltd (ARMS) 42 MRB & Associates (P) Ltd 5 Astra Development Network Pvt. Ltd 43 Multi Disciplinary Consultants (P.) LTD 6 Auto Cart Consult (P) Ltd 44 MULTI LAB (P) Ltd 7 BDA Nepal (P) Ltd. 45 Multi Software (P) Ltd 8 Building Design Authority (P.) Ltd 46 Multi- aim Technology Consult Pvt. Ltd. 9 Butwal Power Company Ltd. 47 Mutual Engineering Consultancies Pvt. Ltd 10 CEMAT Consultants (P) Ltd. 48 NED Consult (P) Ltd 11 CEMECA Consultants (P) Ltd. 49 Nepalconsult (P.) Ltd 12 Consolidated Management Services Nepal (P) Ltd. 50 North Star Engineering Consultants (P) Ltd 13 Creative Builders Collaborative Pvt. Ltd 51 PETRO Engineering Consultancy 14 Development Engineering and Management (P) Ltd 52 Premium Consults (P). Ltd 15 DIP Consultancy (P) Ltd 53 Project Engineering Consultancy and Research Pvt. Ltd 16 East Consult (P) Ltd. 54 Q.S Technical Pvt. Ltd 17 East West Engineering Services 55 R. S. Engineering Services 18 Engar Consult (P) Ltd. 56 RITI Consultancy (P). Ltd 19 Environments and Resource Management Consultants (P) Ltd. (ERMC) 57 Rural Access Engineering Consultants Pvt. Ltd 20 Everest Engineering Consultants 58 Sand and Stone Consultants (P) Ltd 21 Fuji Int'l Design Associates (FIDA) 59 Shah Associates (P) Ltd. 22 Full Bright Consultancy (Pvt.) Ltd. 60 Shah Consult International (P) Ltd 23 GENESIS Consultancy Pvt. Ltd 61 SILT Consultants (P) Ltd. 24 GEOCE Consultants (P) Ltd. 62 Soil Test (P) Ltd. 25 Group of Engineers' Consortium (P) Ltd. 63 SPD Consultants (P) Ltd 26 HEET Consult Pvt. Ltd. 64 Sub Structural Consult Pvt.. Ltd 27 Hydro Engineering And Development Company (P) Ltd 65 Sustainable Infrastructure Development Foundations (SIDEF) 28 Hydro Engineering Services (P) Ltd. 66 TAEC Consult P. Ltd. 29 Hydro Trans (P) Ltd 67 TEAM Nepal (P) Ltd 30 Innovative Creaters Architects & Engineers (P) Ltd. 68 TECH Studio of Engineering 31 Integrated Consultants Nepal Pvt.Ltd 69 Technical Development Associates (P) Ltd 32 Integrated Developments and Research Services (P) Ltd. (IDRS) 70 Technical Interfaces 33 Integrated Management Engineering Research Consultancy (P) Ltd. 71 TIME Consult (P).Ltd 34 Integrated Research Applications and Development (IRAD) 72 Total Management Services 35 ITECO Nepal (P.) Ltd 73 United Designers & Associates 36 ITECO-CEMAT GEOTECH SERVICES (P). Ltd 74 Water Resources Consult (P) Ltd 37 Joshi Associates 75 WELINK Consultants (P) Ltd 38 K.D Associates Pvt. Ltd. 8
  8. 8. Characteristics of Consultants 1. Inadequate fee/cut- throat competition 2. Confused type of morale 3. Undue pressure from client and contractor 4. No liability 5. No corporate culture 9
  9. 9. Can you develop consultant’s performance evaluation system, as a part of your thesis? 10
  10. 10. SCAEF Code of Conduct A consulting engineer will: •be honest and fair and will serve the client and the public with devotion, •be dedicated to the advancement of the competence of the engineering profession, and •use knowledge and skill in the service of humanity Responsibility towards the nation •Moral responsibility •Involvement in community development •Refrain from works which are against national interest Responsibility towards the client •Gain and maintain client’s confidence •Loyal to the client •Protect interest of the client •Safeguard client’s confidential information •Disclose conflict of interest Responsibility towards the profession •Necessity of formal qualification •Refrain from claiming skill outside area of expertise •Exercise greater skill in specialized jobs •High quality of skill •Limiting to agreed remuneration: cannot ask for higher remuneration by trapping client into difficult situation •Refrain from holding position with potential for conflict of interest •Engage in professional development through regular updating on knowledge & skills11
  11. 11. 1. Strengths •Over 20 years Experiences working on development projects •English capability •Dedication, hard working and honesty •Experiences working with int’l organizations •Knowledge of int’l standards and guidelines •Expertise available in many sectors, particularly in hill & mountain infrastructure •Well equipped (both office and field equipments) •Capability and willingness of working in difficult situations (terrain/climate/conflict) •Competitive in cost •Networking through SCAEF 2. Weakness •Institutional development at infancy •Lack of supportive policy and legislation •Lack of clarity in policy, regulation on consulting services •Lack of an accreditation system •Lack of matured professionalism among consulting firms •Lack of training •Lack of learning from the past experiences •Human resource constraint •Lack of promotion and awareness of consulting profession •Unable to compete in the int’l market as a firm/consortium Lack of business networking and marketing Opportunities •Being a developing country, Nepal offers a promising domestic market with a lot of infrastructure projects to come •Neighboring two latest international markets - China and India •Increasing opportunities from international aid agencies •Government policy on outsourcing consulting services •Increasing use of consulting services by the private sector •WTO membership FIDIC and TCDPAP membership Threats •Unhealthy competition/corruption •Political instability •Poor economy •Brian drain •WTO/globalization/foreign competition •Different policies/guidelines/procedures/documents applied by the Government and different international aid agencies (ADB, WB, etc) Government indifference in supporting national consulting industry SWOT Analysis of Consulting Services Perform SWOT Analysis of Clients, Consulting Services, Contractors, …12
  12. 12. 13 Compared to other countries, Nepal’s portfolio performance has suffered due to the prolonged procurement process, weak project management capacity and weak performance of consultants and contractors. Contract awarding and disbursement in Nepal is far lower than the ADB average of 47% and 66% percent, respectively. Do you dis/agree?
  13. 13. 3. Contractor Class A B C D Total Number 172 (130) 337 (49) 1328 (49) 10,000 (13) 11837 (241) Source: FCAN 2008 Number in parenthesis are from FCAN publication Sept 2011, V.17, N. 20. They represent registered contractors. On line database in preparation phase. http://www.fcan.org.np/pages.php?pid=40 New System: Classification of Contractors is dynamic; a function of annual turnover. 14 http://www.grin.com/en/e-book/280463/status-of-class-a- construction-entrepreneurs-in-nepal  A thesis
  14. 14.  Federation of Contractors’ Association of Nepal (FCAN) – 1990,  Further info: www.fcan.org.np  Construction Business Act 2055 (1999)  Construction Business Development Council and Construction Business Development and Implementation Committee  GDP contribution about 9% (CBS, 2001)  One of the largest employer (1 million) 15
  15. 15. Characteristics of Contractors 1. Low bid 2. Low management skill 3. Less use of technology 4. Family business 5. Use of low paid informal manpower Further reading: G. Ofori: Challenges of Construction Industries in Developing Countries: Lessons from Various Countries Informal Labour in the Construction Industry in Nepal, ILO, Working Paper 187, 2002 16
  16. 16. FCAN Code of Conduct (selected only) 1. Contractors shall not be involved in any activity against fundamental principles of morality. 5. Contractors shall not be involved in any form of corruption. 6. Contractors shall not be involved in any activity which may be deemed immoral and illegal/criminal. 15.Members and office bearers are prohibited from misuse of authority for personal gain. 16.Members and office bearers are prohibited from accepting jobs through unsealed quotation, hand receipt documents of users’ community, daily wage (amaanat), quotation, or from organizations like National Construction Company Nepal (NCCN). 18. Since inferior quality works of a contractor defame all the contractors, no one shall be involved in unhealthy competition and inferior-quality works. 17
  17. 17. In the absence of proper coordination among project partners, the project environment deteriorates. 18
  18. 18. A site engineer sent this message to the design engineer: "Steel roof and column already constructed, kindly send us the foundation drawings.“ Moral: Please send foundation drawings before superstructure drawings19
  19. 19. 4. Funding (Donor/lending) agencies  World Bank  ADB  JICA  SDC  European Union  Helvetas  GIZ  DFID  Various countries  IFC  IMF  EXIM Banks  Donor driven projects  Less contribution for countries’ development compared to their claim  High handedness  Improper/misuse of funds  Fund repatriation 20
  20. 20. 5. Material Suppliers and allied industries  Industries – reinforcement and cement, but not adequate • Major materials from outside the country •Low quality materials •Unreliable supply when needed • Sharp rise in the price of construction materials Federation of Construction Material Suppliers Federation of Crusher and Mining Industries (2014) 21
  21. 21. Management Aspect of Project Environment in Developing Countries Top level Strategic planning Middle level Management control Operational level Operation control 24
  22. 22. Top level management 1. Overwork 2. Authoritarian 3. Centralized decision making 4. Politically influenced (party affiliation based hiring) 5. Involved in many activities Do not concentrate on one project 6. Less trust to subordinates 7. Unclear vision/ objective (Concentrated on self- benefit) 25
  23. 23. Middle level management 1. Less management/administrative skill 2. Over worked (Understaffed) 3. High liability/responsibility low authority 4. Unwilling to take decision/action 5. Low motivation 27
  24. 24. Operational level 1. High operation cost (Inefficient) 2. Low productivity 3. Low salary 4. Low morale 5. Unaware of corporate culture 6. Lack of training 7. Lack of professionalism 8. Less mechanization 9. Politically influenced 10. Over staffed and under utilized 11. Distrust of higher management 28
  25. 25. 29
  26. 26. 30
  27. 27. Legal Aspect of Project Environment in Developing Countries (refer http://www.lawcommission.gov.np/ for complete list)  Acts related to construction industry  Public Procurement Act 2063 (2007), amended on Asar 8, 2068  Construction Business Act 2055 (1999)  Labor Act 2048 (1992)  Contract Act 1999  Income Tax Act, 2002  VAT Act, 1997  Rules and regulations related to construction industry  Standard Bidding Document, Nat’l Competitive Bidding for above 6 Million Rupees 2010, Public Procurement Regulation 2064, Construction Business Regulation 2056  Public Private Partnership  White Paper, Fast Track, small projects, implementable regulation lacking  Built, Operate and Transfer / Built , Own, Operate and Transfer Company Act, 2006 Insurance Act, 1992 Immigration Act, 1992 FITT Act, 1992 Int’l Laws, conventions, bilateral agreements 31
  28. 28. Social Aspect of Project Environment in Developing Countries  People’s expectations from construction projects  Investors as profit mongers  Gender aspects of employment in construction projects  Safety of workers (Safety Last Culture!)  Construction projects as bargaining chips (rent seeking culture)  Local attitude towards construction projects as exploitation of their natural resources  Lack of skilled workers and lack of professionalism  High priority to social customs and low priority to quality works  Bribery/corruption as an accepted social norm  Gullible workers and cunning labor leaders/ social mobilizers  Role of social mobilizers in construction project 32
  29. 29. Financial Aspects  Nepal Accounting Standards on construction contracts (https://www.ican.org.np/_downloads/accstd/NAS13.pdf)  Financial institutes (Banks, Finance companies, Cooperatives, private lenders…)  Investment institutes  Foreign Direct investment (FITT Act)  Safety of investment: nationalization, minimum profit margin  Profit Margin and justifiable/reasonable profit  Profit sharing  Transparency  e-bidding and e-procurement  Corruption 33 Potential Thesis topic: Strengths and weaknesses in financial institutes’ policies and practices related to construction industry in Nepal.
  30. 30. External Parameters affecting Project Environment  International agencies  Multinational agencies  Supranational agencies  Bilateral agreements, BIPPA  Multilateral agreements, WTO, PPP  Nepal’s over-dependence on India for construction materials/equipments/fuel and transit  Politics and changing policies  Skilled human resources migrating to other 34
  31. 31. Answer these questions.  Discuss the factors which determine the role of major types of participants in a construction project? How can they play their role in creating positive/negative project environment?  Discuss the characteristics of (a) client, (b) consultant, (c) contractor and (d) donor agencies involved in an infrastructure development type of construction project in a typical developing country?  Discuss the factors which determine the role of major participants in a construction project. How can they play their role in creating positive/negative project environment?  Discuss the characteristics of top level, middle level and operational level management staff in a construction management in developing countries. Suggest ways to improve the coordination among the three tiers of management staff for better management of a construction project.  Discuss, with specific examples, the social, economic, political, legal and technological factors influencing project environment in a developing country.  Discuss the positive and negative role a local community leader can play in success of a construction project. How can the potential negative role of a local community leader in construction project be minimized? 35
  32. 32. Further Readings: Public Procurement Act White paper on PPP Contract Labour in Nepal, DP Chapagain End of Chapter5 36