Chapter 5

Project Environment in

Developing Countries

(4 hours)

1

2

ProjectEnvironment

Construction IndustryEnvironment

MacroEnvironment

StakeholdersResources

Culture/Practices

Client(Public/Private)

Consultants

Contractors

Suppliers

CommunitiesSpecial InterestGroups

Creditors/Donors

Political Legal Forces

Economic Forces

Social ForcesTechnological

Forces

Government

Construction Industry Environment: Project participants

Project participa

nts

ClientGov/Pvt

Funding

agencies/Don

ors

Contractor

Consultant

Construction

materials suppliers and allied industries

4

1. Client

Characteristics1. Over politicized2. Lack of finance3. Corruption4. Inefficient5. Unaccountable6. Frequently changing

personnel7. Frequently changing

designsPrivate Client:8. Low budget9. Delay in payment10.Design change11.No

contract/nonprofessional

Line Agencies:• DoR, DoI, DoLIDAR,

DWSS/KUKL• DWIDP, DSCWM, …• NEA, NT, …Municipal corporationsDDC, VDCIndustries and other private

constructionsPrivate 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

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

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) Ltd5 Astra Development Network Pvt. Ltd 43 Multi Disciplinary Consultants (P.) LTD 6 Auto Cart Consult (P) Ltd 44 MULTI LAB (P) Ltd7 BDA Nepal (P) Ltd. 45 Multi Software (P) Ltd8 Building Design Authority (P.) Ltd 46 Multi- aim Technology Consult Pvt. Ltd.9 Butwal Power Company Ltd. 47 Mutual Engineering Consultancies Pvt. Ltd10 CEMAT Consultants (P) Ltd. 48 NED Consult (P) Ltd11 CEMECA Consultants (P) Ltd. 49 Nepalconsult (P.) Ltd 12 Consolidated Management Services Nepal (P) Ltd. 50 North Star Engineering Consultants (P) Ltd13 Creative Builders Collaborative Pvt. Ltd 51 PETRO Engineering Consultancy 14 Development Engineering and Management (P) Ltd 52 Premium Consults (P). Ltd15 DIP Consultancy (P) Ltd 53 Project Engineering Consultancy and Research Pvt. Ltd 16 East Consult (P) Ltd. 54 Q.S Technical Pvt. Ltd17 East West Engineering Services 55 R. S. Engineering Services18 Engar Consult (P) Ltd. 56 RITI Consultancy (P). Ltd19 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) Ltd21 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) Ltd26 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) Ltd32 Integrated Developments and Research Services (P) Ltd. (IDRS) 70 Technical Interfaces 33 Integrated Management Engineering Research Consultancy (P) Ltd. 71 TIME Consult (P).Ltd34 Integrated Research Applications and Development (IRAD) 72 Total Management Services35 ITECO Nepal (P.) Ltd 73 United Designers & Associates 36 ITECO-CEMAT GEOTECH SERVICES (P). Ltd 74 Water Resources Consult (P) Ltd37 Joshi Associates 75 WELINK Consultants (P) Ltd38 K.D Associates Pvt. Ltd.

8

Characteristics of Consultants

1. Inadequate fee/cut-throat competition

2. Confused type of morale

3. Undue pressure from client and contractor

4. No liability5. No corporate

culture6. Unhealthy

competition7. High turnover

9

Can you develop consultant’s performance evaluation system, as a part of your thesis?

10

SCAEF Code of ConductA 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 humanityResponsibility towards the nation•Moral responsibility•Involvement in community development•Refrain from works which are against national interestResponsibility 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 interestResponsibility 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

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

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?

3. ContractorClass A B C D Total

Number 172 (130)

337 (49)

1328 (49)

10,000 (13)

11837 (241)

Source: FCAN 2008Number 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=40New 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

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

Characteristics of Contractors

1. Low bid2. Low management skill3. Less use of technology4. Family business5. Use of low paid

informal manpowerFurther 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

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

In the absence of proper coordination among project partners, the project environment deteriorates.

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

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

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

Management Aspect of Project Environment in Developing Countries

Top levelStrategic planning

Middle levelManagement

control

Operational level

Operation control

24

Top level management

1. Overwork2. Authoritarian3. Centralized decision making4. Politically influenced

(party affiliation based hiring)5. Involved in many activities

Do not concentrate on one project6. Less trust to subordinates7. Unclear vision/ objective (Concentrated on

self-benefit)8. High turnover rate

25

Middle level management1. Less

management/administrative skill2. Over worked (Understaffed)3. High liability/responsibility low

authority4. Unwilling to take decision/action5. Low motivation

27

Operational level 1. High operation cost (Inefficient)2. Low productivity3. Low salary4. Low morale5. Unaware of corporate culture6. Lack of training7. Lack of professionalism8. Less mechanization9. Politically influenced10. Over staffed and under utilized11. Distrust of higher management

28

29

30

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 Nepal Arbitration Council Construction project dispute related court cases

Company Act, 2006Insurance Act, 1992Immigration Act, 1992FITT Act, 1992Int’l Laws, conventions, bilateral agreements

31

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 Role of politicians in construction project

32

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.

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 countries

34

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

Further Readings:Public Procurement Act

White paper on PPPContract Labour in Nepal, DP Chapagain

End of Chapter5

36