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 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 its 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 and HSE standard; regulatory and local content requirements; work ethics; and post award performance.
Nowadays, more and more companies are adhering to contractor risk management standards; though their framework and guidelines may differ slightly from one another.
Basically, the framework and 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 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.
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 the project being delayed may occur. The checklist comes in several categories. They are:
> Technical capability: construction; detailed engineering, procurement, startup and training; and project execution;
> Human resource: current workload and resources; selection of key personnel and 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 the 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; and
> 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 the non-performance by the contractor can be avoided or minimised. Otherwise, it will certainly have an unpleasant impact on the overall project concerned.
(The writer was a manager with a GLC)