Society and Construction Project Management (Part I)

(in Developing Countries)6 hours

Hari Krishna ShresthaCenter for Postgraduate Studies

Nepal Engineering CollegeChangunarayan, Bhaktapur

Project Investment Models:Increase in private investmentInvestment Models: BOT, BOOT, PPP, and othersBank and financial institutes’ involvement in Construction Projects: Rate of interestPublic project investmentPrivate project investment

Pre construction Activities: Social considerations: Construction Project Engineering and Administration, Chapter 7Bidding complexities and e-biddingBid bond and their conditionsSite visit by the bidders, bid preparation by the biddersStudy of tender documentCompleteness of tender document and ambiguities

Increasing expectations: Employer’s expectation – universal knowledgeStringent environmental parametersMeeting Project objectivesExpectation of high quality and accepting low bidsHope of zero accident and willingness to spendInvolvement of users’ community during project planning and development

Increase in Private Investment• Rs 55 billion in around 25 under construction hydropower projects: IPPAN• According to the business confidence index released in Kathmandu the other day,

investors’ confidence has gone up from earlier 48 per cent to 50 per cent this year. http://trn.gorkhapatraonline.com/index.php/editorial/2732-rise-in-business-confidence.html

• Land acquisition, clearance from forest and environment line agencies, and local obstructions: hindrances for private investment in HPP in Nepal

Further reading:• Investment Climate in Nepal http://www.investnepal.gov.np/portal/index.php?p1=content&p2=8

Investment Models: forms of project finance: BOT, BOOT, PPP

• The PPP model The Chilime Hydropower Project, which has been developed under PPP model, is an example of how local participation and ownership can facilitate timely completion of the projects. In the project developed by Chilime Hydropower Company Limited, majority of shares (51 per cent) belong to the NEA, 10 per cent is owned by locals of the area, 25 per cent by its staff and the remaining 14 per cent shares were floated in the market for general public.

Chilime is a perfect example of how to develop a capital-intensive hydropower project in a country where there is inadequacy of resources and a spectrum of local issues. Giving people living in the project area ownership in the project not only puts legal claims at rest, it also facilitates acquisition and compensation issues.

• PPP Model for Investment in Hydropower: Pramod Rijal• http://www.thehimalayantimes.com/perspectives/fullnews.php?headline=PPP+model+

of+investment+in+hydropower&newsid=MTI3NQ==

• Further Reading: http://en.wikipedia.org/wiki/Build%E2%80%93operate%E2%80%93transfer

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Power trade agreement between Nepal and India: Oct 22, 2014Source: http://www.ekantipur.com/2014/10/22/headlines/Nepal-India-enact-power-trade/396690/

• The models like PPP and build-own-operate-transfer (BOOT) have been brought forward to increase participation of the private sector in economic development. Participation of the private sector in construction of the major infrastructure projects is almost non-existent apart from operation of a few public enterprises (PE), construction of a few hydropower projects and operation of the country’s only dry port through these models. The Kathmandu-Kulekhani-Hetauda Tunnel Way to be constructed by Nepal Purbadhar Bikash Company Limited (NPBCL) is moving forward as a model project in PPP model in such situation. The Rs 35.50 billion project can become an important foundation for infrastructure development of Nepal.

• Source: Editorial, Karobar, Sunday August 24, 2014• http://www.karobardaily.com/news/2014/08/increased-

confidence-about-construction-of-tunnel-way

Hurdles in implementation of PPP model in investment in infrastructure development

• Legal• Socio-cultural• Institutional• Technical capacity of private parties• Management capacity of private parties• Political (national and local)• International geo-politics• Policies of INGOs, banks and donor agencies

Bank and Financial Institutions: Rate of Interest

• Banks and financial institutes provide loan on (70:30) basis for infrastructure development projects. The normal interest on loans is around 13 to 14% per annum (general) and 10 to 11% for prime customers.

B&FI Investment: FY 2070/71: NRs. BillionIndustry 32.1Construction 23.49Wholesale/retail 45.94Transportation/Communication/Public Utility 3.45

Source: Nepalpatra Weekly, Sept 6-12, 2014, Vol. 23, No. 20,

Public Project Investment

• Government investment: NEA, NT, Investment Board

• Banks (individual bank or consortium of banks)• Provident Fund and Citizen Investment Fund,• World Bank, IFC, ADB• JICA, EXIM Banks, INGOs• FDI: GMR/Upper Karnali, Sutlej: Arun III, …

Private Project Investment

• FNCCI, IPPAN• Private individual and groups investing in hydropower has

increased• Private parties in PPP projects• Private investment in BOOT projectsProblems of private investment• Difficulty in land acquisition• Changing laws, rules, regulations, fee• Political instability, local politicsPDA: to address common concerns of government and private investors: Why PDA?: Office of the Investment Board, GoN

http://www.investmentboard.gov.np/detail/why_pda.html

Increasing Expectations• Client/Employer’s expectations• “Stringent” environmental parameters• Meeting Project Objectives• Expectation of high quality and accepting low bids• Hope of Zero Accident and Willingness to pay

(spend)

Client/Employer’s expectations

• Client/employer’s expectations are on the rise.• The expected standards of performance

(financial, environmental, social, quantity and quality), in internationally funded projects are on the rise

• The expected standards of performance in large private and public projects are on the rise

Stringent environmental parameters

• Environmental parameters are getting more “stringent”• Case of MoSTE vs. FNCMI (Crusher Industries), 2014• Guidelines prepared for environmental audit• Clearance of IEE by concerned line ministry are

required.• Concerned ministry prepares/checks the IEE of the

projects under the ministry.• EIA vetted by MoSTE/concerned ministry before project

clearance.

Regulating and Monitoring Capacity Building forEnvironmental Impact Assessment (EIA) of

Hydropower Project in NepalA Guide to

Environmental Auditing ofHydropower Projects

Government of NepalMinistry of Environment, Science and Technology

With the assistance ofRoyal Norwegian Government

and technical assistance ofNorwegian Directorate for Nature Management

Kathmandu, NepalSeptember 2006

Meeting Project Objectives

Evaluation of whether a project met project objective are conducted through:• Technical Audit• Environmental Audit• Social Audit• Financial Audit

Expectation of high quality and accepting low bids

• There is a mismatch between expectation of high quality and acceptance of low bids by the same customer/client/employer.

• Public Procurement Act directs to accept lowest bidder among them who qualified technically.

Hope of Zero Accident and Willingness to pay (spend)

• Zero accident policy is yet to be adopted in most of the projects in Nepal.

• Willingness to pay for implementation of such a policy can be achieved through improvements in current rules and strict implementation of the rules.

• As long as breach of rule is less expensive and compensation payment to the injured is less expensive compared to expense of insurance and preventative measures, the zero accident policy will be difficult to be implemented.

Involvement of User’s Community during project planning and development

• User’s Community are increasingly being involved in planning and development of projects in many developing countries.

• Water Users’ Committee• Forest Users’ Committee• Land Users’ Committee …The involvement of the users’ committee is expected to make the projects demand driven, use more local resources, create job, sustainable output and outcome, less costly in terms of O&M, transfer technology, more transparent, …What is the reality of the involvement of users’ committee in project planning and development in Nepal? (A potential MSc Thesis).

Society and Construction Project Management (Part II)

(in Developing Countries)

Land Acquisition

"Land" means any land belonging to any person, and walls, buildings, trees, etc., permanently installed thereon.Government of Nepal may, if it so deems necessary, acquire any land at any place for any public purpose, subject to compensation under the Land Acquisition Act, 1977.The Act contains a "quick take" provision empowering GoN to "occupy a parcel in special circumstances" simply by issuing a notice. If the acquired land is not required for the original purpose due to various reasons, GoN can use it for another similar purpose.

For details, refer Land Acquisition Act 1977.

Process of Land Acquisition Any GoN agency is authorized to acquire land and an officer of any GoN institution may initiate a land acquisition proceeding. If the land is found suitable, a notice of intent to acquire is issued. At this point, the local Land Administrator or Revenue Officer suspends processing of any further transactions concerning the land.

In practice, requests for land initiate among GoN agencies but acquisition itself is carried out under the guidance of the Chief District Officer (CDO) and Compensation Committee which engages in negotiations with land owners.

In practice usually following steps are adopted while acquiring the land: i) Preparation of project documents: a) Type of land required, b) Location, c) Quantity,

d) The reason for the required land, e) By what time land should be available

ii) Information collection: a) Number of land holdings, b) Number of land owners, c) Number of tenants

iii) Public notice regarding locus standing (hak dabi) from the related office. Duration of this period is of three months. a) Preparation of document (list) of different types of land and land owners b) Handing of the list of CDO office through related Ministry c) Public notice regarding land acquisition, compensation from CDO office d) Clearing up or estimation list account from Survey Department and Land Revenue office.

Source: Chhetri, R. P., Land Policy Instruments

Cost of Land

Depends on:• Location (road, road width, road in the south side versus

north side, cultural places, open space, job market, clean versus polluting industries)

• Access to facilities (market, electricity, water, gas, telephone), productivity, slope, shape)

• Price of land in neighboring plots• Development prospects in the near future• Social fabric• Existing structures, wells, …

Valuation of Private properties• A Valuator does not invent value, but interprets the market forces that determine the

value, a professional valuator determines the value of property based upon market conditions at a given time and situation.

• In Nepal, only cost approach of property valuation is used. There are four major approaches that are used in property valuation globally - cost approach, sales comparison approach, income approach and market approach.

• to assess the right value of the property the stakeholders -banks and valuators need to have extensive database of prices of inputs that can be referred to when valuing a property based on cost approach.

• “While determining the amount of compensation for land to be acquired for institutions other than Local Bodies, and institutions fully owned by GoN, the Compensation Fixation Committee shall take the following criteria into consideration:

(a) The price of the land at the time of the publication of a notice of land acquisition (b) The Value of the crops, houses, walls, sheds, etc, if any, acquired along with the land,(c) The losses which the concerned person will suffer as a result of shifting his/her residence, or the place of his/her business, by reason of the acquisition of his/her land” (Land Acquisition Act 1977)

Valuation of trees and plants: Price of timber, fruits, crop yield of one season.

Problems affecting land acquisitiona) rapidly rising land prices which bag down negotiations and payment of

compensations; b) many land owners still do not have certificate of land title c) inadequate registered records (e.g. grandson uses the asset but the dead

grandfather still holds the land title, transfer of land ownership has not been done yet)

d) inadequate or not updated maps e) land owned by different trusts f) land owned by many people g) people do not come to claim their land or do not come to take

compensation h) small landholdings i) people do not want to pay for betterment value

Source: Chhetri, R. P., Land Policy Instruments

EHS: Environment, Health, Safety Issues

Contractor MobilizationDuring mobilization the contractor might: • Arrange a pre-contract meeting to discuss the procedures that will be adopted during the construction stage. • Co-ordinate the preparation and issue of a project handbook setting out responsibilities, procedures, and lines of communication for the construction • Prepare a schedules of conditions for adjacent properties or structures that will be retained. • Publish a master programme for the works. • Agree the basic principles with the design team to be used for grid lines and setting out of the site. • Prepare method statements and obtains method statements from sub-contractors such as demolition and groundwork sub-contractors. • Prepare a site layout plan for construction. • Place sub-contracts and tender unselected contract work. • Advertise and select any catering, security and cleaning contracts as well as any direct labour requirements. • Establish a contract register scheduling; the contracts that have been placed, who signed them and when, what the value of the contract is and where it is

stored. This can be crucial information if for example the contractor becomes insolvent. • Establish an asset register scheduling assets on site and who they belong to. This information may later be incorporated into the building owner's manual. • Establish all statutory site registers such as; lifting equipment, dangerous and explosive substance storage, scaffolding and accident reports. • Manage specialist design and drawing approval. The contractor may wish to appoint a design co-ordinator to be responsible for this. • Comply with any statutory conditions that must be satisfied prior to construction commencing (such as tree protection, submission of contaminated soil

disposal plans, approval of work adjacent to an operating rail track and so on). • Establish inspection regimes and quality assurance procedures for construction. • Instigate any geotechnical survey work required. • Obtain statutory utility drawings of all existing and surrounding services. • Arrange road closures and restrictions, diversions of services and connections necessary for the works to be carried out. • Obtain legal documentation describing precisely the site boundary and ownership. • Notify the local authority (or approved inspector) of their intention to begin construction. Construction must not being until at least 2 days after

notification has been given, or if an approved inspector is appointed, until the 'initial notice' to appoint an approved inspector has been accepted by the local authority (acceptance may be assumed if no valid rejection has been received 5 days after issuing the initial notice). The contractor should also agree the procedures and programme for inspections by the local authority or approved inspector (such as drains, foundations and damp proof courses).

• Inform the emergency services of the intention to begin construction. • Commission a survey team to establish semi permanent setting-out theodolite base plates. • Arrange for the statutory utilities to provide the necessary water, power supplies, and ICT services required for construction activities.

http://www.designingbuildings.co.uk/wiki/Mobilisation

Incorporating Peoples’ DemandFeasible vs. unfeasible

• Demand management• Expectation management• Social Mobilizer• Rent seeking culture• Feasible demands: no conflict between people’s objective and

project objective, the B/C ratio does not go too low. • Unfeasible demands: when people’s objectives and project

objectives contradict; when demands are made with ill-purpose; when expectation is too high, B/C ratio unacceptably low, payback period too long, risk level too high, fulfillment of demand may create new demands, conflicting demands from different sectors/groups, demands are against law or beyond the project scope.

Role of Local Youth Organizations

• Youth Organization: source of energy• Can be used or abused• Role can be positive or negative, based on

how it is used.

Labor Issues

• Labor Act 2048Working Hours:• Maximum 8 hours a day or 48 hours a week as working

hour. Workers are provided one-day leave in a week.• 30 minutes of break between shifts; maximum shift of 5

hours. This break shall be also counted in regular working hour.

• extra remuneration for overtime work; no forced overtime.

• Maximum of 4 hours/day or 20 hours /week.

Labor Issues• Environment, Health and Safety (EHS) issues and awareness: • EHS management has two general objectives: prevention of incidents or accidents that might

result from abnormal operating conditions on the one hand and reduction of adverse effects that result from normal operating conditions on the other hand. Also referred to as OSH.

Manager of an enterprise is responsible:• In keeping clean the workplace• In managing sufficient air, light, and temperature• In managing waste disposal• For clearing all the foul dust, air, vapor, and any other foul substance that may cause hazard to

health• For preventing workers from loud noise• A worker shall be provided 15 cu. m. space. In calculating this volume, only 4 m height

measured form floor level is considered.• For arranging water (drinking and sanitation)• For arranging toilets separate for ladies and gents• Considering the nature of the work, the working area shall be made non-smoking area• Arranging for medical checkup for staff and workers at least once in a year in the enterprises

having probability of health hazard; manage first aid kit• For other protective measures such as prevention of eye, prevention from chemicals,

prevention from fire etc.

Environment, Health and Safety (EHS)

• Environmental and social management framework (ESMF) for power sector reform and sustainable hydropower development project (PSRSHDP), WECS-DoED-NEA, 2015

http://en.wikipedia.org/wiki/Environment,_health_and_safety

Environment, Health and Safety (EHS)

1. Environmental1.1 Air Emissions and Ambient Air Quality1.2 Energy Conservation1.3 Wastewater and Ambient Water Quality1.4 Water Conservation1.5 Hazardous Materials Management1.6 Waste Management1.7 Noise1.8 Contaminated Land and Remediation1.9 releases to water1.10 releases to land1.11 use of raw materials and natural resources1.12 energy emitted, heat/radiation/vibration1.13 waste and by-products

http://en.wikipedia.org/wiki/Environment,_health_and_safety

EHS

2. Occupational Health and Safety2.1 General Facility Design and Operation2.2 Communication and Training2.3 Physical Hazards2.4 Chemical Hazards2.5 Biological Hazards2.6 Radiological Hazards2.7 Personal Protective Equipment (PPE)2.8 Special Hazard Environments2.9 Monitoringhttp://en.wikipedia.org/wiki/Environment,_health_and_safety

Minor Labor, Gender and Equity consideration• Minor Labor: between 14 and 18 years• Gender and Equity Consideration• Design of facilities should be gender sensitive, not gender

neutral or gender biased.• Equity represents fairness (justice), or what may be termed as

the equality of outcomes. This involves factoring in aspects of the system that have put particular groups at a disadvantage.

• Equality: one size fits all.• Equity:

– positive discrimination– Affirmative action

Labor Unions

• Highly politicized• Interested in higher wages only• Intervention in non-labor related issues• Poorly organized

Application of project management tools

• CMP• PERT• MS Project• Primevera• Project ManagementCurrent Status of application of project management tools in Nepal

Selection of Project Management Tools

• Depends on available resources• Human Resources• Financial Resources• Project Type• Local Project• Large Project• Project Purpose

Frequency of Updating Project Management tool application skill

Self Test• How can feasible and unfeasible demands be separated?• Suggest practical tools to deal with incessant local demands?• What are the basic EHS issues in a construction project?• List the problems of land acquisition and suggest practical

ways to solve them.