Construction Management in Developing Countries, Lecture 5, Project environment in developing countries, characteristics of project partners in Nepal, social, financial, legal and environmental issues in project environment in Nepal

1. Chapter 5
Project
Environment in
Developing
Countries
(4 hours)
1

2. 2
Project
Environment
Construction Industry
Environment
Macro
Environment
Stakeholders
Resources
Culture/Practices
Client
(Public/Private)
Consultants
Contractors
Suppliers
CommunitiesSpecial Interest
Groups
Creditors/Donors
Political Legal
Forces
Economic Forces
Social Forces
Technological
Forces
Government

3. Construction Industry
Environment: Project
participants
Project
participant
s
Client
Gov/Pvt
Funding
agencie
s/Donor
s
Contracto
r
Consulta
nt
Constructio
n materials
suppliers
and allied
industries
4

4. 1. Client
Characteristics
1. Over politicized
2. Lack of finance
3. Corruption
4. Inefficient
5. Unaccountable
6. Frequently changing
personnel
7. Frequently changing
designs
Private Client:
1. Low budget
2. Delay in payment
3. Design change
Line Agencies:
• DoR, DoI, DoLIDAR,
DWSS/KUKL
• DWIDP, DSCWM, …
• NEA, NT, …
Municipal corporations
DDC, VDC
Industries and other private
constructions
Private 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

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

6. 7

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) Ltd
5 Astra Development Network Pvt. Ltd 43 Multi Disciplinary Consultants (P.) LTD
6 Auto Cart Consult (P) Ltd 44 MULTI LAB (P) Ltd
7 BDA Nepal (P) Ltd. 45 Multi Software (P) Ltd
8 Building Design Authority (P.) Ltd 46 Multi- aim Technology Consult Pvt. Ltd.
9 Butwal Power Company Ltd. 47 Mutual Engineering Consultancies Pvt. Ltd
10 CEMAT Consultants (P) Ltd. 48 NED Consult (P) Ltd
11 CEMECA Consultants (P) Ltd. 49 Nepalconsult (P.) Ltd
12 Consolidated Management Services Nepal (P) Ltd. 50 North Star Engineering Consultants (P) Ltd
13 Creative Builders Collaborative Pvt. Ltd 51 PETRO Engineering Consultancy
14 Development Engineering and Management (P) Ltd 52 Premium Consults (P). Ltd
15 DIP Consultancy (P) Ltd 53 Project Engineering Consultancy and Research Pvt. Ltd
16 East Consult (P) Ltd. 54 Q.S Technical Pvt. Ltd
17 East West Engineering Services 55 R. S. Engineering Services
18 Engar Consult (P) Ltd. 56 RITI Consultancy (P). Ltd
19 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) Ltd
21 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) Ltd
26 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) Ltd
32 Integrated Developments and Research Services (P) Ltd. (IDRS) 70 Technical Interfaces
33 Integrated Management Engineering Research Consultancy (P) Ltd. 71 TIME Consult (P).Ltd
34 Integrated Research Applications and Development (IRAD) 72 Total Management Services
35 ITECO Nepal (P.) Ltd 73 United Designers & Associates
36 ITECO-CEMAT GEOTECH SERVICES (P). Ltd 74 Water Resources Consult (P) Ltd
37 Joshi Associates 75 WELINK Consultants (P) Ltd
38 K.D Associates Pvt. Ltd.
8

8. Characteristics of
Consultants
1. Inadequate fee/cut-
throat competition
2. Confused type of
morale
3. Undue pressure from
client and contractor
4. No liability
5. No corporate culture
9

9. Can you develop consultant’s performance evaluation
system, as a part of your thesis?
10

10. SCAEF Code of Conduct
A 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 humanity
Responsibility towards the nation
•Moral responsibility
•Involvement in community development
•Refrain from works which are against national interest
Responsibility 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 interest
Responsibility 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

11. 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

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?

13. 3. Contractor
Class A B C D Total
Number 172
(130)
337
(49)
1328
(49)
10,000
(13)
11837
(241)
Source: FCAN 2008
Number 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=40
New 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

14.  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

15. Characteristics of Contractors
1. Low bid
2. Low management skill
3. Less use of technology
4. Family business
5. Use of low paid informal
manpower
Further 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

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

17. In the absence of proper coordination among project
partners, the project environment deteriorates.
18

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

19. 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

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

21. Management Aspect of Project
Environment in Developing
Countries
Top level
Strategic
planning
Middle level
Management
control
Operational
level
Operation
control
24

22. Top level
management
1. Overwork
2. Authoritarian
3. Centralized decision making
4. Politically influenced
(party affiliation based hiring)
5. Involved in many activities
Do not concentrate on one project
6. Less trust to subordinates
7. Unclear vision/ objective (Concentrated on self-
benefit)
25

23. Middle level management
1. Less management/administrative skill
2. Over worked (Understaffed)
3. High liability/responsibility low
authority
4. Unwilling to take decision/action
5. Low motivation
27

24. Operational level
1. High operation cost (Inefficient)
2. Low productivity
3. Low salary
4. Low morale
5. Unaware of corporate culture
6. Lack of training
7. Lack of professionalism
8. Less mechanization
9. Politically influenced
10. Over staffed and under utilized
11. Distrust of higher management
28

25. 29

26. 30

27. 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
Company Act, 2006
Insurance Act, 1992
Immigration Act, 1992
FITT Act, 1992
Int’l Laws, conventions, bilateral
agreements
31

28. 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
32

29. 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.

30. 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
34

31. 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

32. Further Readings:
Public Procurement Act
White paper on PPP
Contract Labour in Nepal, DP Chapagain
End of Chapter5
36