China in Africa

Chinese Overseas EPC Project Management

Kaibo Engineering Group Corp.

Beijing
Oct 2010

KAIBO ENGINEERING GROUP CORP.

Personal Introduction

MBA, Duke University, USA.
Bachelor in Engineering , AUT University ,New Zealand

Mr. Tom Zhu has extensive engineering project consulting
experience internationally, including in China and New
Zealand. Tom has been involved in several startup projects
in both countries. In addition to civil engineering
projects, Tom also possess significant experience in the

Mr. Tom Zhu real estate sector.

Contact：
Tel： +86-10-59073235
Email： tzhu@kaibogroup.com

2

Kaibo Engineering Group

Ⅰ. Core Business
International project management（EPCM、PMC）

Ⅱ. Core Team
Kaibo Group‟s team is made up of project management scholars and researchers from
prestigious academic institutions like Yale, Duke, Stanford, and experienced
engineering project management specialists.

Ⅲ. 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

Contents

I. Chinese enterprises overseas project market
development
II. Chinese main project cases
III. Current Chinese Overseas Engineering Project
Management Situation
IV. Current International Project Management Features

V. How To Manage Chinese Engineering Contractors

4

Ⅰ. Chinese enterprises overseas project market
development

(Ⅰ) History of Chinese enterprises overseas project

development

(Ⅱ) Primary Markets and Project Cases

(Ⅲ) Project contracting market in Africa

5

development

1. 1950s
During this period, Chinese overseas projects were focused primarily on rebuilding Asian
and African countries

2. Initial stage (1978-1982) :
In 1978, Chinese enterprises began to enter the international engineering contracting
market. Before 1983, Chinese enterprises that were engaged in foreign project contracts
and labor service cooperation contracts totaled less than 30. The total value of signed
contracts 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 engineering
contracts and labor service cooperation contracts, and the completed turnover was $7.2
billion. The market has expanded to more than 130 countries and regions.

6

development

4. Rapid development stage (1990-1999)
Between 1990 and 1998, Chinese enterprises signed foreign contracted projects
and labor cooperation contracts that totaled $70.66 billion at an annual increase of
24.1% 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 contracted
projects, and the business scale is rapidly expanding. In 2010, there was a total of
54 Chinese enterprises in the ENR top 225 international contractors who won
13.2% of international market share, the most in the world. Overseas turnover was
$50.57 billion.

7

development


（二）现有管理水平评（二）现有管理水平评价价（二）现有管
理水平评价

8


1. Primary Markets: Tender amounts distribution of
Chinese enterprises overseas project
Chinese enterprises overseas markets in 2009
project markets include Africa Asia
Africa, Asia, Middle Latin America The Middle East
East, Europe, Latin Europ North America
America, North America, etc. Oceania
5% 2%
13%
39%
17%
24%

9


Primary 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 million
U.S. dollars)

58.4
44.34 39.96 39.45

Libya Sudan Algeria Nigeria
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2. Types of investment Distribution of project investment types in 2009
projects:
Tender Amount(%) Value(%)
49
Chinese enterprises
overseas projects 34
primarily include: 25
transportation, housing 13 13 11 9 7 7 10 6 5 4 3
construction, petroche 2 2
mical, water
utilities, and other
industrial facilities.

11

development


（二）现有管理水平评（二）现有管理水平评价价（二）现有管
理水平评价

12


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


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.

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2. China-Africa relations
China-Africa relations have lasted for half a century. The strong relationship
has paved the way for economic and trade cooperation between China and
Africa, while greatly promoting cooperation in project contracting .

In 1971, with the
1956, China support of allies In 2000, China-
established in Africa, China Africa
diplomatic resumed Cooperation
relations membership in Forum was
with Egypt the UN founded

In late-1963 to In In 2006, the
early 1995, Chinese China-Africa
1964, Premier President Jiang summit held
Zhou Enlai visited Zemin visited in Beijing
10 countries in Africa
Africa

15


3. Chinese enterprises in Africa
• From 1970's to 1980`s , there were mostly self-financed projects. From
1976-1985 project contracts signed between China and African
The initial countries totaled to $1.131 billion, completed turnover was about $334
stage million.

• From 1980's to 1990s: the four principles of China-Africa economic
cooperation, "equality and mutual benefit, seeking practical
results, diversity, and common development," were established. China
Progressive experienced rapid growth in contracted projects in Africa. In 1994, the
development establishment of “Export-Import Bank of China“ provided support for
stage more contracted projects in Africa. Also in 1994, new contracts
between China and African countries amounted up to $715
million, and complete turnover of $614 million.

• From 1990S to now: With the establishment of China-Africa
Cooperation Forum, Chinese enterprises in Africa entered a new rapid
Rapid
growth stage. In 2009, Chinese enterprises in Africa's market share
growth stage reached 36.6%, more than the sum of all other European
contractors, ranking first among all.

16


4. Future cooperation between China and Africa
(1) China-Africa economy and trade are highly complementary
Africa 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 Africa
At 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


 South Africa announced it will invest $78 billion in infrastructure
development, including energy, transportation, and housing
 Kenya announced it will issue bonds of $4.5 billion to raise financial resources
for infrastructure
 Nigeria plans to invest $ 8 billion in port construction and maintenance
upgrades
 Mauritius plans to invest $800 million for a large-scale improvement in
transportation infrastructure
 Ethiopia has received a loan totaling $3.3 billion dollars from the African
Development Bank for the construction of a connecting highway linking
Kenya with Ethiopia.

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4. Future cooperation between China and Africa
(3) The advantages of Chinese enterprises

 Over the past 50 years, China has been involved with 525 infrastructure projects in
African countries, and has established a high reputation due to the high level of
cooperation between Chinese and African firms. This has made Chinese enterprises
widely recognized in African countries.
 The China-Africa Cooperation Forum has created favorable conditions for Chinese
enterprises to cooperate with African countries. In 2006, the Beijing based China-Africa
Cooperation Forum launched its campaign to continue developing Sino-African relations.
In November 2009, the China-Africa Cooperation Forum was held in Egypt, and the
Chinese government launched a new program, designed to vigorously promote
cooperation in infrastructure construction.
 China's economic support to Africa. The Chinese government is prepared to provide over
$100 billion dollars in preferential loans to Africa, while increasing the overall financing
capacity of continent at large. It also will allow Chinese financial institutions to establish a
special 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

Contents

development
II. China's main project cases


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Ⅱ. China's main project cases

(Ⅰ) The world-class projects cases in China
1. The world's largest hydropower project - the Three Gorges Dam
2. Shanghai Jinmao Tower
3. The world's highest and longest plateau railway - Qinghai-Tibet Railway
(Ⅱ) Chinese Contractors' Remarkable Projects in International Market
1. Venezuela's Northern Plains Rail System (Tinaco to Anaco rail section)
2. COCA CODO-SINCLAIR Hydropower Project in Ecuador
3. Universal Studios Singapore
(Ⅲ) 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

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(Ⅰ) The world-class projects cases within China

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1. The world's 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 world's largest water
conservancy project, and is a world leader in stand-alone capacity, installed
capacity, annual energy output, project size, and metal structure.

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（一）中国国内世界级的工程项目案例

24


2. Shanghai Jinmao Tower
• General Contractor: Shanghai Construction Engineering Group
• Project Size: The Shanghai Jinmao Tower project covered and area of
290,000 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 Shanghai‟s Pudong
district, a Lujiazui Finance and Trade Zone beside the Huangpu River. The
Jin Mao tower is over 420 meters tall, and is the third highest the skyscraper
in both Shanghai and China and is the 8th tallest in the world. Construction
began in 1994, and was completed in1998. 88 floors are above ground, and
when coupled with the lobby and basement it increases to 93. The tower has
130 lifts and 555 rooms. It has been become a landmark of Shanghai, and
has evolved into a modern office building, five-star hotel, convention
center, entertainment complex, and shopping mall. It is a true blend of
Chinese and Western construction techniques, and is a multifunctional
skyscraper.

25


3. Qinghai-Tibet Railway
• General Contractor: China Railway Group Limited
• Total length: 1956 kilometers. A high altitude project, over half of the
Qinghai-Tibet railway was built at an elevation 4000 meters above sea
level, 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 China‟s four
major projects in the 21st century, and is a milestone that marks the
implementation of a Western development strategy. This railway links east
of Xining, Qinghai with west of Lhasa, Tibet. The Qinghai-Tibet Railway is
the world's highest and longest plateau railway

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(Ⅱ) Chinese Contractors' Remarkable Projects in
International Market

27


1. Venezuela's 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,Anzoátegui.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.

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2. 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 Ecuador‟s population‟s electricity demand.

29


3. 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 World's 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.

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(Ⅲ) 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 Angola

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(Ⅲ) Chinese Contractors' Remarkable Projects in
Africa

1.Chinese Highway Projects in Africa

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Africa

(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 People‟s 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

Africa

(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 project‟s 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.

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Africa

2.Chinese Railway Projects in Africa

35

Africa

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 of
a two-lane standard gauge railway from the southern city of Lagos to the
northern city of Kano. The railway is 1315 km long and is design for speeds
up to 150 km/hour. The project contract amounts to $8.3 billion. This capital
is funded by a $10 billion low-interest soft loans provided by the Export-
Import Bank of China. China Civil Engineering Construction Corporation is
responsible for the entire project including design, procurement, and
construction. This is the largest international engineering contracting project
that Chinese enterprises have contracted.

36

Africa

3.Chinese Water Conservation and Hydropower
Projects in Africa

37

Africa

(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 Dam‟s 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

Africa

(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 Station‟s functions include water
conservation, power generation, irrigation, and more. It is the largest
hydropower station in the country and is commonly referred to as Ethiopia's
"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 Africa's highest thin arch concrete
hyperbolic. After the station was completed, the total installed capacity of
Ethiopia increased nearly 30%, greatly contributing to Ethiopia‟s economic
development.

39

Africa

4.Chinese Housing projects in Africa

40

Africa

(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

Africa

(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

Contents

development


43

Ⅲ. Current Chinese Overseas Engineering Project

(Ⅰ) Evaluation of Existing Management

(Ⅱ) Main Advantages of Chinese Contracting Companies

(Ⅲ) Main Challenges of Chinese Contracting Companies

44

（Ⅰ） Evaluation of Existing Management

After 20 years of overseas expansion, China has made remarkable
achievements in engineering project management including the
following：
1. Achieved excellent engineering performance
2. Achieved engineering contract diversification
3. Established organizations compatible with general contracting
function
4. Established general contracting project management system
5. Achieved advanced project management skill among select
enterprises
6. Trained a great number of project management professionals

45


(Ⅱ) Main Advantages of Chinese

Contracting Companies

46

（Ⅱ） Main Advantages of Chinese Contracting Companies

1. Cost-price advantage

(1) Materials
Full range of cost-effective materials from China such as electronic
accessories, steel, furniture, etc. The materials can meet European
standards and have significant price advantage.
(2) Human resources
Abundant human resources with high efficiency and skilled expertise
(3) Equipment
Provision of cost-effective engineering equipment set. Chinese
equipment has capital, labor, technology intensive characteristics, high
performance-low cost, and more applicable to many developing countries
in Asia and Africa.

47

琐琐碎碎
琐琐
2. Skill and Management Advantages

(1) Professional skills: Experienced in hydropower, roads and bridges, housing
construction, etc.; Advanced technical level in international projects

For example, Chinese enterprises have built the world's largest steel
reinforced concrete dam; the world's highest railway(5, 072m above sea
level); and various other world-class engineering projects

(2) Skilled workers: Professional skills and highly efficient

(3) Management level: Technology output and management-intensive
combination significantly enhances the management level.

(4) Diligently promote localization of management 琐琐碎碎

48


3. Financial Advantage
(1) Strong Self-funding Capability
Most of China's 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 ENR‟s “world's 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”

47 47 49 49 49 51 50 54
39 43
33

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
49


(2) Strong Financing Capability:
China has abundant capital The proportion of
reserves, meaning China's banks can China`s capital in total
provide long-term and low-cost credit tender`s amount
for overseas projects China's capital Others

(3) China„s Abundant Foreign Exchange
Reserves: 28%
China‟s foreign exchange reserves
reached to $ 2.454275 trillion US 72%

dollars in June 2010. This can provide
a solid economic foundation for China's
overseas engineering contracts.

50


4. Policy advantage
(1) “Going out" Strategy
From "going out" special funds to the loan interest subsidy and other
subsidies, China intensively issued a series of policies in the short term
to support enterprises in "going out”. These policies provide great
support for companies that are developing overseas.

(2) Support Policy
China's export tax rebate policy significantly reduces the cost of
procurement of materials, equipment, etc. from China, and enhances
China‟s competitiveness in overseas contracting projects for Chinese
companies

51


4. 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


5. 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


(Ⅲ) Main Challenges of Chinese

Contracting Companies

54

（Ⅲ）Main Challenges of Chinese Contracting Companies

1. 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


2. 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 risks

56


3. Communication problems

(1) Linguistic capacity

Case：Project Management conflicts

(2) Communication rules and skills

Case：Minutes of Meeting

(3) Familiarity with local culture and customs

Case：Attire, Company Email

57


4. Regular Standards
(1) China‟s standards lack foreign language versions

(2) Promotion of China‟s standards is not sufficient and is not recognized
overseas

(3) China need to improve company standards

(4) Chinese enterprises have failed to fully converge

with international standards

58


5. 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


6. HSE awareness, social responsibility, and brand
awareness 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 of
experience to promote own competitive advantages and
characteristics

60


7. The main problems in management
26 26 25
22
18 18 17 17 17 16 16

Based on the survey of 30 Chinese engineering
contractors on 8 July 2010

61

Contents

development


62

Ⅳ. Current International Project Management Features

(Ⅰ) Integration

(Ⅱ) Standardization

(Ⅲ) Specialization

(Ⅳ) Information

(Ⅴ) Internationalization

63


(Ⅰ) Integration
1. In the past 5 years, China's international project contracting business volume is
equivalent to the total volume in the past 20 years. The overall annual growth rate
is 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 more
than $50 million US dollars, constituting 51% of total bids and 94% of total
contracts
3. In 2000, there were 9 total projects valued over $100 million US dollars; in
2009, there were 240.
4. There are relatively more EPC and the D & B projects (more than half of the total
projects). The average project value of the first half of 2010 reached $483 million
US dollars, and in 2009 was $324 million US dollars.
Year 2004 2005 2006 2007 2008 2009
Turnover of China's international
contracted projects ($100 million 174.7 217.6 300 406 566 777
US dollars)

64


(Ⅱ) Standardization
1. Procedures

2. Forms

3. Regulations

4. Information

5. Training

65


(Ⅲ) Specialization
1. Professional Software
e.g. Primavera, @Risk, Project etc.
2. Subcontract team and service team specialization
Case：3600T Crane
3. Each link connecting closely and directly
4. The application of professional management techniques
5. Refine specification of inner work
Control, contract, design, quality, procurement, construction, HSE, labor, testing, coor
dination, Document Control and others
Don`t match of Professional division of labor become an progress obstacle of many
enterprises.
Case：The Organization chart of an construction project in Australia.

66

Case：琐琐碎碎
琐琐
Owner’s Team

EPCM Team

571 Positions

琐琐碎碎
The Organization chart of an construction project in Australia.

67


(Ⅳ) Informatization
1. Full use of network

e.g. MSN, Aconex, Email and Variety of network platforms.

2. Rapidly in response

Case：Contract Termination Notice，Focal Point

3. Orderly distribution
Appropriate for integration of general understanding

and precise control.

68


(Ⅴ) Internationalization

1. Labor ： International Labor

2. Material： Global Procurement

3. Management： Consulting Company

4. Finance, Exchange Rate and Taxation

69

Contents

development


70

Ⅴ. How To Manage Chinese Engineering Contractors

(Ⅰ) Pursuit of sustainable development
(Ⅱ) Give up low price tender strategy
(Ⅲ) Standardized project management method
(Ⅳ) Adopt flexible and realistic standards and management methods
(Ⅴ) Strengthen management of project implementation phase
(Ⅵ) Choose high-quality consulting company and cultivate localized
management talent
(Ⅶ) Guide localization of Chinese engineering contractors
(Ⅷ) Improve professionalism of Chinese contractors
(Ⅸ) Provide the necessary support and assistance to the Chinese engineering
contractors
(Ⅹ) Maintain a stable political environment and prepare adequate financial
resources

71


(Ⅰ) 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 facility‟s humanization

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(Ⅱ) Give up low price tender strategy
1. Difficult to ensure project quality and safety

2. Influences on-schedule project completion

3. Leads to operating phase investment increase by the owner

4. Promotes construction companies to make poor decisions by

increasing changes

5. Corrosive to a clean and honest construction administration.

6 Hinders the healthy development of the entire construction industry

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(Ⅲ) Standardized project management method
1. Adopt cross-border operation and international management of large-scale
projects
2. Specify and refine the specification of work
Including design, construction, procurement, contract, HSE, quality, document
control, etc.
3. Make use of advanced software
Such as Primavera, @ Risk, Exp, and other software to make project
management more efficient
4. Improve the use of information and make full use of network resources
Such as Aconex, email and various network platforms
5. Introduce high-quality consulting firms into China and train owners and
contractors
6. Focus on audit of contractor organization and management

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(Ⅳ) Adopt flexible and realistic standard and management
methods
1. Adopt Chinese standards
(1) After 30 years of development, Chinese standards have formed a complete
set of engineering and technical specifications
(2) China's engineering and technical specifications are self-contained by
reference to Western standards, covering all areas of engineering. Its level
are not lower than or higher than the standard level in Europe and US. For
example, China's pier standards v. U.S. pier standards
(3) The English text version of Chinese standard will be available soon and is
committed 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 with
Chinese standards, therefore project management and implementation has
become more smooth

75


(Ⅳ) Adopt flexible and realistic standards and management
methods
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


(Ⅴ) 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


(Ⅵ) Choose high-quality consulting company, cultivate
localized management talent
1. 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 the
Chinese contractor
(2) From the management factor, they are familiar with both Western and Chinese
project management concepts and thus can manage more effectively

2. Hire professional supervision teams
(1) Familiar with local legal requirements
(2) Familiar with local customs

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(Ⅵ) Choose high-quality consulting company, cultivate
localized management talent
3. Strengthen training of the management team and construction team for going
abroad

4. Demand the management company and main contractor to train local staff

5. Cultivate localized talents and arrange acceptable training of talents in the
management company or in the main contractor company

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Quality: good personal qualities, positive team
attitude, pursuit of excellence, be respectful

Information Quality Habits: responsible work habits, smooth functioning of the
team, maintain high level of work efficiency

Thinking: clear thinking is a fundamental condition of a
Procedure Habits good project manager

Professional: appropriate division of labor, make full use of
favorable conditions and promote complementarities;
Professional Thinking everybody can be a talent

Procedure: in modern management one must follow
procedures to improve program management

Information: appropriate and adequate information sharing
contributes to the team‟s efficiency
Six Supporting
Points


(Ⅶ) Guide localization of Chinese engineering contractors

1. Help Chinese contractors establish stability offices in local area

2. Encourage Chinese contractors in achieving localization of human

resources

3. Strengthen the communication with the Chinese contractors

overseas offices

4. Guide Chinese contractors to understand and respect local customs

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(Ⅷ) Improve professionalism of Chinese contractors
1. Increase their self-regulation level

2. Cultivate a good sense of time and improve work efficiency

3. Emphasize commitment and promise

4. Act in accordance with contractual specifications

5. Familiar with international business and cultural etiquette

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(Ⅸ) Provide the necessary support and assistance to the
Chinese engineering contractors
1. Establish a win-win concept and enhance service awareness
2. Provide necessary assistance to labor input
Such as: visa processing
3. Assist the contractor to complete the necessary approvals
4. Assist contractors to adapt to local environment in a timely manner
5. Help speed up the rate of cash flow

83


(Ⅹ) Maintain a stable political environment and prepare
adequate financial resources
1. Stabilize political environment
For example, political controversy may affect the progress of the project
2. Maintain policy‟s continuity
3. Establish clear decision-making systems and institutions
4. Prepare adequate financial resources and make use of China's financial
advantages
5. Rationally use resources to enhance operational capacity of capital
6. Process payments in a timely manner

84

Questions & Discussion

Questions & Discussion

85

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