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Minimising project delays
There have been newspaper reports
about projects that have been severely delayed. Among them were KLIA2 and the Shah
Alam Hospital.
The former began operations on May
2, 2014 while the latter is expected to be operational in stages by the end of
2015.
These project delays can be
caused by several factors including the lack of building materials, changes to
the original designs, and new requirements being added to the original plan,
etc.
However, in the real life
situations, many projects have been delayed due to changing of main contractor after
work had started.
Selecting the right main
contractor is the most important factor. Once the award has been made, based on
a stringent tendering process, this main contractor is responsible to undertake
the project from start to finish, including handing over to the client.
The main contractor would
normally engage several sub-contractors to complete the project. This is a normal
scenario in the industry.
Project delays can be avoided or
minimised if business-like criteria are used in the tendering process. These
criteria are contained in the work process as what the industry calls
contractor risk management.
It is defined as the risk of
non-performance by the contractor of contract obligations.
Several elements form part and
parcel of the contractor risk. These elements include but are not limited to capability;
quality & HSE standard; regulatory & local content requirements; work
ethics; and post award performance.
Nowadays, more and more companies
are adhering to contractor risk management standards; though their framework
& guidelines may differ slightly from one another.
Basically, the framework &
guidelines of the contractor risk will have sub-elements such as: definition of
the element; checklist; mitigation; and indicator for monitoring. It will
suffice if we go through one of the most important sub-elements, i.e.
capability.
Capability
Capability is defined as the contractor having adequate resources,
experience, competencies and project execution capabilities in order to carry
out the obligations of the contract. In terms of resources, it must include
financial solidity, sufficient manpower, adequate equipment and abundant
materials.
Checklist
The
successful contractor selected to carry out the project from start to finish
must be able to pass the risk checklist, failing which the risk of project
being delayed may occur. The checklist comes in several categories. They are:
-Technical capability:
construction; detailed engineering, procurement, start up and training; and
project execution.
-Human resource: current workload
and resources; selection of key personnel & experience; skilled manpower
availability; and total man-hour estimates; and
-Financial: cash flow management;
performance and bank guarantee; and currency fluctuation (if applicable).
Mitigation: The contract must have the clause to prevent replacement of key
personnel. The contractor must also be able to propose candidates for project
manager, construction manager and planner or scheduler. To avoid possible
project delay from happening, a comprehensive project control system must be in
place.
Indicator for monitoring: The client must always be on alert for one or
more of the following indicators. It signals that something needs to be done in
order to avoid possible project delay. They are:
-Progress is slow and performance
is not up to the mark;
-Slow or late mobilisation of
contractor’s personnel and equipment;
-Downtime is high due to
breakdown of equipment;
-Shortage of labour;
-High turnover of main contractor
and sub-contractor personnel;
-Litigation issues seem to happen;
-Lower credit facilities;
-Lower paid-up capital.
This capability sub-element and
other sub-elements in the framework and guidelines must be properly executed
and monitored so that non-performance by contractor can be avoided or minimised.
Otherwise, it will certainly have an unpleasant impact on the overall project
concerned.
KAMARUDDIN HASSAN
Shah Alam
(The writer was a manager with a GLC)
9 Rejab 1436H
