Claims (Delay and Cost Overrun) in Building Project in Public
Sector: Case Study in Mekong Area, Vietnam
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)
Introduction
Building projects in Mekong Delta, Vietnam
Cantho Airport
An Giang supper market (D)
Aquiculture College, CTU (E)
Public contractors
Six building projects of case study
Private contractors
Cantho Bridge
Medicine and Pharmacy University (F)
College of Technology, CTU (A)
Can tho Sport Competition House (B)
Bac Lieu Committee Building (C)
Introduction
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
(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.
Objectives
Research direction
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?
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
OUTPUT
DATA COLLECTION, ANALYSIS
INPUT
Identification of Claims Causes, Settlement and Attitudes
Methodology
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)
PROJECT SELECTION
- 3 Projects of public contr.
- 3 projects of private
contr.
Expert Discussion
Document data collection:
Contracts, diaries, meeting
record and schedules
List of Claims sources,
Settlement and Attitude
Claim causes
Relationships’ causes
Observation
Interview 6 Participants
Ranking claim causes
Claim attitudes
CONCLUSION
- Claim causes
- Claim management
- Claim culture
Claim causes
Claim analysis
Claim attitudes
- 26 Claim causes
- Relationships of claim causes
- Claim analysis methods: Delay & Cost overrun
- Claim attitudes
- Claim climate assessment
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
Data Analysis
Delay time Analysis
Compare between the initial and final duration
Actual duration
680
F
F
Initial duration
869
(O)
82 (C)
107
(O) Delay
time of Owner
(C) Delay
time of contractor
(C)
59
Projects
770
(O)
41
E
Actual duration
670
E
Private
Contractor
∑ Delay:46%
Initual duration
D
C
Public
Contractor
∑ Delay:
174%
720
D
1407
Projects
(O)
335
B
(C)
532
A
435
C
1193
0
(O)
217
(C)
541
200
400
600
800
1000
1200
1400
Days
365
B
1506
(O)
520
(C)
621
-Average total delay: 110%
- Percentage of additional time
on total delay: average: 41.57%
598
A
812
(O)
90
200
400
600
(C)
124
800
Days
1000
1200
200
1600
Data Analysis
Delay time and delay factors of Contractor
Owner,
15.34%
External,
3.83%
Designer &
consultant,
30.51%
Low
productivity,
17.31%
Defective
works and
reworks,
24.13%
Contractor,
50.32%
It is root of shortage of
equipment, shortage materials,
choosing incompetent
subcontractors and suppliers.
Delay or
Disruption,
27.35%
60
50
Amount (Billion VND)
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%
Competence of Contractor
is a serious problem: Main
power, Equipment, and
Finance.
Mistakes
during
construction
, 31.21%
Cost estimate
Initial contract value
40
30
20
10
-
A
B
C
D
Projects
E
F
Data Analysis
Causes of delay of 6 cases
(Based on document record, smaller than total delay time)
Delay Causes
Design changes by mistakes
Mistakes during construction
Additional works by owner
Delay or Disruption
Defective works and reworks
Low productivity
Inspection of completed works
Unforeseen site conditions
Price fluctuations
Caused by
Group
Designer
Contractor
Owner
Contractor
Contractor
Contractor
Consultant
External
External
Total delay
Percent
time (days)
686
485
480
425
375
290
269
65
55
21.92%
15.50%
15.34%
13.58%
11.98%
9.27%
8.59%
2.08%
1.76%
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 Overrun
Cost estimate, initial contract value, claim paid and actual value.
60
50
Cost estimate
Initial contract value
Claim paid
Actual contract value
Amount (Billion VND)
40
30
20
10
-
A
B
C
D
E
F
(10)
Projects
Comparison between initial contract values and claims paid by the client.
60
Initial contract value
Amount (Billion VND)
50
Percentage of decreasing
bidding price (average:
4.98%)
Claim paid
40
30
20
Percentage of claim
paid (average: 21.55%)
10
0
A
B
C
D
-10
Projects
E
F
Data Analysis
Causes of cost overruns
Causes of cost overrun of 6 cases (Based on document)
Adding cost factor
Groups Claim Amount (VND)Percentage of Claims
Design changes by mistakesDesigner
9,437,909,000
30.03%
Price fluctuations
External
7,408,428,000
23.57%
Additional works by owner Owner
6,926,039,000
22.04%
Unforeseen site conditions External
5,239,300,000
16.67%
Inaccurate estimates
Unforeseen site
conditions,
16.67%
Additional works
by owner, 22.04%
Designer
Inaccurate
estimates, 7.70%
2,420,273,000
7.70%
Design changes
by mistakes,
30.03%
Price fluctuations,
23.57%
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)
Lack of capable
project managers
Additional works/
reworks by
owner
Obstacles from
government
Financial difficulties
of owner
Unclear contractual
conditions
Owners’ site
clearance
difficulties
Slow payment
of completed
works
Lack of capable
site supervisors
Inspection of
completed works
Bad weather
Delay or
Disruption
Shortages of
skilled workers
Low productivity
Price fluctuations
Shortages of
materials
Shortage of
equipment
Financial difficulties
of contractor
Low awarded bid
prices
Designers’
inadequate
experience and
capability
Incompetent
subcontractors
Inaccurate
estimates
Inappropriate
construction
methods
Mistakes during
construction
Defective works
and reworks
Unforeseen site
conditions
Design changes
by mistakes
Compensation
from owner
No
Compensation
from owner
Delay
and/or
Additional
Cost
Data Analysis
Objective 2: Claim Analysis
Objective 1
Identification
Claim Causes
Objective 2
Claim settlement: Analysis
for additional cost
Analysis for additional time
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.
Site office
Local labors
Just in time to delivery material and
equipment. No warehouse cost.
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.
Thank you!
5/2010
Nguyen Van Tam