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  1. 1. Available online at www.sciencedirect.com INTERNATIONAL JOURNAL OF PROJECT MANAGEMENT International Journal of Project Management 26 (2008) 758–769 www.elsevier.com/locate/ijproman Improving project management performance of large contractors using benchmarking approach Van Truong Luu a, Soo-Yong Kim b,* , Tuan-Anh Huynh c a Interdisciplinary Program of Construction Engineering and Management, Pukyong National University, San 100, Yongdang-Dong, Nam-Gu, Busan 608-739, Republic of Korea b Division of Construction Engineering, Pukyong National University, San 100, Yongdang-Dong, Nam-Gu, Busan 608-739, Republic of Korea c Power Engineering and Consulting Company No. 3 (PECC3), Ho Chi Minh City, Viet Nam Received 8 February 2007; received in revised form 1 October 2007; accepted 2 October 2007 Abstract This paper presents how benchmarking approach can be applied to evaluate and improve the construction project management. A conceptual research framework was generally developed to perform a benchmarking study of the project management performance (PMP) from the contractor’s viewpoint. Three typical large contractors are involved in this study to validate the research approach. The paper provided in nine key performance indicators (KPIs) which can be applied to measure PMP and evaluate potential contractors as well as their capacity by requesting these indices. The findings suggested that benchmarking approach can help construction firms to learn from the best practices of others and carry out continuous improvement. The research methodology has general use thus it may be applied to other contractors with minor modifications. Ó 2007 Elsevier Ltd and IPMA. All rights reserved. Keywords: Benchmarking; Construction; Implementation; Key performance indicator (KPI); Managing projects; Vietnam 1. Introduction construction project management, the project quality, and their own operation. Performance measurement is Traditionally, companies with all of their components of the heart of ceaseless improvement. Performance manage- business models working together can often achieve long- ment aims at offering managers and members of staff of lasting success [1]. Similarly, the construction contractors all ranks the ability to develop the direction, traction and succeed in their business for many years with one measure speed of their organization [5]. As a regular rule, bench- only – financial norms [2]. With the effect of the manage- marking is the next step to improve contractors’ efficiency ment that concentrates on this single measure (profit max- and effectiveness of products and processes. imization) may disregard of investing time and money in This study is focusing on Vietnam, a developing country the improvement of these key success factors [2]. All con- in South East Asia with a reformed economical policy. The struction activities may have risk and uncertainty [3], espe- major purpose of this research is to measure and improve cially in developing countries where the construction the project management performance (PMP) of large con- environment is much riskier [4]. Vietnam is not an excep- tractors in this local market using benchmarking approach. tion. In order to exit and emulate in the dynamic market- The research questions seem to be localized, but the place, contractors must continually improve the approach has general use. Therefore, the paper results in valuable lessons for both researchers and practitioners in * Corresponding author. Tel.: +82 51 620 1548; fax: +82 51 628 2231. application of benchmarking to improve their E-mail address: kims@pknu.ac.kr (S.-Y. Kim). performance. 0263-7863/$30.00 Ó 2007 Elsevier Ltd and IPMA. All rights reserved. doi:10.1016/j.ijproman.2007.10.002
  2. 2. V.T. Luu et al. / International Journal of Project Management 26 (2008) 758–769 759 2. Literature review been paid to examples of the effectiveness of benchmark- ing, but they have focused on application oriented [20], 2.1. Background on benchmarking promoting profitability of benchmarking [21,22] as well as its possible benefits [23], results oriented [24] and method Xerox Corporation initiated the concept of benchmark- oriented [25]. ing in order to encounter with the Japanese competitive Benchmarking approach has also proved its usefulness challenge of the 1970s [6,7]. There are several ways to clas- in measuring PMP based on key performance indicators sify types of benchmarking. Based on what benchmarking (KPIs) or success criteria. There were some papers that focused on, three types of benchmarking are: (1) perfor- provided valuable findings on the different KPIs to mea- mance; (2) process; and (3) strategic. The comparison sure PMP. New frameworks have been proposed to con- between one company and another may depend on perfor- sider success criteria [26] and to define project success mance benchmarking [8]. It is loosely to point out that per- [27]. Success factors and criteria have been also identified formance benchmarking is the comparison with established through summarizing several research works [28]. Further- standards or performance data of other organizations in more, Nguyen et al. [29] uncovered 15 project success fac- order to improve the organization’s own performance. tors grouped under four COMs: comfort, competence, The comparison of methods and practices for performing commitment and communication. According to Shenhar business processes is based on the process benchmarking et al. [30], four dimensions for measuring project success so as to learn from the best and to improve ones own pro- are project efficiency, impact on the customer, direct and cesses whereas strategic benchmarking is the comparison of business success, and preparing for the future. However, the strategic choices and dispositions which is made by regarding perceptions of project success, Wateridge [31] other organizations for the purpose of collecting informa- confirmed that project managers often concentrated on tion so that they would be able to improve their own stra- the success factors without success criteria whereas users tegic planning and positioning [6]. may be more concerned about their happiness with perfor- Regarding the environment against benchmarking, the mance in the long-term. Since project managers’ success is classifications of benchmarking are among internal, exter- judged on the quality of a project [32], quality performance nal. With internal benchmarking, an organization collects measures have been used instead of traditional perfor- data on its own performance and assessment so as to make mance measures of meeting time and costs. To cope with improvements through comparing to past years [9], the rise of stakeholders in project management, Mallak whereas the comparison between one organization and et al. [33] identified and radically discussed categories of competitors in the same industry is external benchmarking stakeholders to manage and design strategies for satisfying [10]. When dealing with external benchmarking, organiza- the stakeholders. In construction industry, the application tions focus on the identification of performance gaps and of benchmarking has also emerged in many academic jour- learn the best practice of competitors. nals and technical reports and following are a review of Although benchmarking has many advantages but it is predominant papers. not a magic tool. ‘‘Benchmarking should not utilize as a way to set goals’’ [7]. It should be used as an improvement 2.3. Benchmarking in the construction industry tool. Regarding main problems affecting a successful benchmarking study, Kozak [9] pointed out time con- Contemporary benchmarking practice frameworks have straints, competitive barriers, lack of both management been proposed to improve construction productivity [34] commitment and professional human resources, resistance and identify critical success factors for design-build pro- to change, poor planning and short-term expectation as jects in construction [35]. Furthermore, Chan and Chan key problems. [36] suggested a set of KPIs to formulate a framework for measuring and benchmarking the success of selected 2.2. Previous research construction projects. Models for application of bench- marking approach have focused on the UK construction The use of benchmarking technique in various fields has industry [8] and improvement of contractor selection for appeared in many academic journals and technical reports. construction projects [37] in Hong Kong. Application of Many studies have been undertaken on the application of benchmarking approach is very promising. Benchmarking benchmarking to customer satisfaction, occupancy rates, can be used to improve the overall attainment of total qual- capital investment [13–15], productivity in tourism and ity management for a UK construction organization [2], to hotels [16], measuring and improving the performance of evaluate construction safety management in China [38], to tourist destinations [17], financial savings [11], and opera- assess safety climates of employees and contractors work- tion improvements [11]. ing within a partnership arrangement [39], and to analyze Since underlying principles of benchmarking resulted the quality of project planning for selected industries in from Deming’s quality management theory [18], the appli- Israel [40]. Interestingly, benchmarking also was suggested cation of benchmarking has predominantly focused on as a useful tool to investigate and manage changes on con- quality management [10,18,19]. Other efforts has recently struction projects [8]. The literature revealed that very few
  3. 3. 760 V.T. Luu et al. / International Journal of Project Management 26 (2008) 758–769 efforts have been devoted to the application of benchmark- PMP. Furthermore, this paper describes only a first stage ing to assess PMP of contractors in developing countries of an overall study that benchmark both PMP and the where the construction industry plays a key role in the real-estate business between aforementioned contractors. economy’s grow rate. Therefore, the core objective of this The overall study is a part of a program sponsored by study is to develop a conceptual framework for improving the Vietnam Association of Construction Contractors PMP of large contractors in Vietnam using benchmarking (VACC) in order to meet two objectives. First, the Viet- approach. To measure PMP, a set of KPIs and sub-KPIs namese construction companies (VCCs) enhance their were addressed through literature review and expert inter- capabilities to compete with foreign companies when Viet- views. Three typical large contractors are involved in this nam enters World Trade Organization (WTO). Secondly, study to validate the proposed framework and identified probable barriers to application of new management KPIs. frameworks, for example benchmarking and balanced scorecard, into a construction company are identified 3. Research methodology for removal. The planed program duration is 2 years (2005–2007). Three outputs of the program are: (1) The selection of an appropriate framework plays a key improving practical skills and knowledge of VCCs’ labor role in executing a good study. Therefore, the study force; (2) achieving effective corporate governance in the adopted steps which were pointed out by Lankford [7] as VCI; and (3) improving and consolidating VCC’s compet- a conceptual framework for developing the benchmarking itive advantages. Therefore, all participants can benefit process. However, it has been adjusted and broken down from the overall study and then the authors received in accordance with specific conditions of Vietnamese con- strong commitments from top managers to conduct the struction industry (VCI). study. All the contractors have similarities in type, size, Table 1 shows the profile of three typical large contrac- number of staffs, average annual revenue, and products tors involved in benchmarking the effectiveness of PMP. but they are different from the effectiveness of PMP. In Since an external benchmarking study is applied when Vietnam, a contractor is normally considered small, med- an organization has a desire to improve its performance ium, and large when his average annual revenue is from through the best practices of competitors [7], the Con- 50 billion VND ($1.00 % VND16045) to 100 billion struction and Investment Corporation 8 (CIC8) were VND, 100 billion VND to 200 billion VND and greater selected as an internal organization. The Cotec Construc- than 200 billion VND, respectively. Moreover, this study tion Corporation (CotecCons) is currently among leading assumed that large contractors must have number of state-owned contractors in Vietnam [50,51]. The Hoa skilled workers, and number of unskilled workers greater Binh Construction and Real Easteate Corporation than 500 and 1000 persons, respectively. (HBC) have gained the owners’ confidence in construction Fig. 1 illustrates the conceptual framework of research and decoration services thereby HBC have become one of methodology, in which the determination of KPIs is an ini- reliable private contractors over the last 2 years [52]. As a tially important step. These KPIs plays a key role in pro- result, HBC and CotecCons were selected as competitors. viding information on the performance of construction Moreover, HBC and CotecCons had good practices in tasks and PMP [41]. Since authors’ expectation is to give PMP but failures in real-estate business whereas CIC8 facilities for practice, the detail research approach is thor- had fairly successful in real-estate but bad practices in oughly introduced in below sections. Table 1 A profile of large contractors Identifying KPIs Contractor Staffs* Annual Major services net revenue Data collection for benchmarking Refer to Figure 2 (billion VND) Construction 350; 206 Construction, decoration, An internal A competitor 1 A competitor 2 investment 580; trading in construction organization (CIC8) (HBC) (CotecCons) company 8 (CIC8) 1500 materials, real-estate investment Hoa Binh 300; 240 Construction, decoration, real- Corporation 820; estate investment Refer to (HBC) 1800 Data analysis for benchmarking Figure 3 Cotec Construction 340; 210 Construction, decoration, real- Corporation 730; estate investment and (CotecCons) 1600 equipment installation Conclusions and Recommendations Note: Staffs* = the number of engineers/architects, skilled workers, and unskilled workers, respectively. Fig. 1. A conceptual framework for the research methodology.
  4. 4. V.T. Luu et al. / International Journal of Project Management 26 (2008) 758–769 761 3.1. Identifying KPIs 3.2. Data collection for benchmarking The main purpose of this step is to identify appropri- Data collection plays a key role in the research pro- ate KPIs may measure the performance towards objec- cess [44], especially in a benchmarking study. Fig. 2 rep- tives of project management. Normally, the project and resents a framework of data collection for benchmarking. organizational performance is measured in terms of KPIs The sources to collect data for benchmarking coming ([42] cited in [36]). Since too many KPIs can lead to from 15 projects were resulted from five for each con- unmanageable, management must select appropriate tractor. All of those had common baseline conditions KPIs for each objective of project management. A set that were consistent with comparing across companies of raw KPIs was initially uncovered from a rigorous lit- and projects. For instance, all projects were: (1) building erature review of previous studies on KPIs/success crite- construction projects; (2) located in Ho Chi Minh city; ria [2,8,26–41,43]. Unstructured interviews have been (3) commenced and completed during the past 2 years conducted to refine factors being in accordance with mea- (2004–2005); (4) small variations of the project scope; suring PMP of large contractors. An expert group of nine (5) the same structural system and foundation; (6) construction practitioners and five academic researchers removed the inflation impact from construction costs; was asked to rate factors on five-point Likert scales. and others. After considering conditions of VCI and characteristics Since without radical verification of identified KPIs ˇ of an effective KPI proposed by Isorait_ [6], aforemen- e may lead to foolish benchmarking, identified KPIs were tioned expert interviews resulted in 30 preliminary KPIs. revised by 18 project managers and 9 engineers who The first questionnaire was designed and distributed to 92 worked directly for 15 selected projects. The purpose of professionals with more than 5 years experience working this work is to ensure whether nine KPIs are appropriate for large contractors. The study adopted five-point Likert for measuring PMP. Respondents agreed with nine KPIs scales (from 1 = ‘not important to measure PMP’ to and their quantifying but disagreed with quantitative for- 5 = ‘very important to measure PMP’) to assign to mulas of KPI-1 and KPI-2. They argued that inflation respondents’ rating. Thirty-two full responses were impacts should be removed from construction costs and obtained showing a reply rate of 34.7%. Analyzing the the extension of time (granted by owners) should be data resulted in nine factors which were significant in added in revised construction time. These were carefully measuring PMP. Table 2 shows the mean value and stan- discussed to finalize quantitative formulas of KPI-1 and dard deviation of nine factors. Standard deviation of KPI-2 (Table 2). each factor was small enough to conclude the respon- Data collection traditionally starts with a pilot data dents agreed on its significance. In addition, the reliability collection phase [8]. Thus, the essential information to analysis also resulted in the Cronbach’s alpha coefficient design questions in a second survey was identified of 0.808. Therefore, those factors may be considered as through a pilot survey involved in 27 aforementioned major KPIs for next steps of the study. project managers and engineers. The purpose of this Table 2 Major KPIs with evaluation approach Code KPIs Evaluation approach SD Mean actual construction cost-estimated construction cost KPI-1 Construction cost The percentage of construction cost variance ¼ estimated construction cost  100 0.456 4.7187 performance KPI-2 Construction time The percentage of construction time variance ¼ discounted construction time  100 where, revised construction time 0.482 4.6563 performance discounted construction time = actual construction time À revised construction duration, revised construction time = original construction duration (recorded in contract) + the extension of time (granted by the owner) KPI-3 Customer satisfaction The degree of customer satisfaction on the contractor’s construction services is measured by a 0.491 4.3750 on services 10-point Likert-type mark (from 1 = ‘‘extremely dissatisfied’’ to 10 = ‘‘extremely satisfied’’) KPI-4 Customer satisfaction The degree of customer satisfaction on the contractor’s construction products is measured by a 0.456 4.2812 on products 10-point Likert-type mark (from 1 = ‘‘extremely dissatisfied’’ to 10 = ‘‘extremely satisfied’’) KPI-5 Quality management The degree of QMS performance is measured by a five-point Liker-type mark (from 1 = ‘‘very 0.390 3.9062 system (QMS) bad performance’’ to 5 = ‘‘very good performance’’) KPI-6 The project team The project team performance at the project level is measured by a five-point Liker-type mark 0.420 3.7812 performance (from 1 = ‘‘very bad performance’’ to 5 = ‘‘very good performance’’) KPI-7 Change management The change management performance at the project level is measured by a five-point Liker- 0.498 3.5938 type mark (from 1 = ‘‘very bad performance’’ to 5 = ‘‘very good performance’’) KPI-8 Material management The material management performance at sites is measured by a five-point Liker-type mark 0.504 3.5625 (from 1 = ‘‘very bad performance’’ to 5 = ‘‘very good performance’’) KPI-9 Labor safety The labor safety performance at the project level is measured by a five-point Liker-type mark 0.508 3.5000 management (from 1 = ‘‘very bad performance’’ to 5 = ‘‘very good performance’’) Note: SD = standard deviation.
  5. 5. 762 V.T. Luu et al. / International Journal of Project Management 26 (2008) 758–769 Interview top management Review project Visiting construction sites, documents qualitative observations, and so on Verify KPIs and identify Collect the following data: sub-indicators • Main information of projects, • Managing project documents, • Records of project finance, Design questionnaires and • Documents of checking and taking over the make a pilot test buildings, • Project team activities, • Quality management system (QMS) performance, and so on. Collect data on PMP Collect data on PMP of the internal of competitors organization Combine collected data Check the No adequateness of Re-collect inadequate data collected data Yes Collected data are ready for analysis and benchmarking Fig. 2. Data collection for benchmarking. survey is to uncover possible sub-indicators of each research project [45] cited in [12], before analyzing, the KPI in order to facilitate measures in practice. Based inadequate data was collected again to ensure it was ade- on identified sub-indicators through the pilot survey, quate and useful for benchmarking. questions are ready to collect data from 15 selected projects. 3.3. Data analysis for benchmarking Fifteen project managers are concerned in data collec- tion. Interview methods are widely used because of gen- The main purpose of this phase is to seek gaps in eral application for differing information requirements PMP of CIC8 and competitors (HBC and CotecCons). and differing situations [44] and, therefore, semi-struc- Fig. 3 illustrates the conceptual framework of data anal- tured interviews were selected to collect data relating to ysis for benchmarking. It is necessary to point out that KPI-1, KPI-2, KPI-5, KPI-6, KPI-7, KPI-8 and KPI-9 how data are measured and processed before analyzing. (Table 2). In addition, the authors have used various As mentioned above, each KPI may be quantified data to discover best practices among contractors. Those through a set of sub-indicators. Quantitative measures data came from observations, and historical project doc- are applied to KPI-1 and KPI-2. Based on the review uments (e.g. site diaries, contract documents, the project’s of historical project documents, the construction cost budget and schedule, bids, quality control programs, performance (KPI-1) was measured by the percentage safety programs, punchlists, as-build drawings and so of cost-overrun in comparison with the estimated cost, on). These were combined with sudden investigations while the construction time performance (KPI-2) was without any notice or partial working together with pro- measured by the percentage of time-overrun as compared ject teams at sites to know whether the information pro- to the revised project duration recorded in contracts vided by participants are reliable. The personal contact (refer to Table 2). Since customer satisfaction typically methods normally produce a high response rate, thus cus- measured by Liker scales [49], project owners and capital tomers were interviewed to portray their satisfactions suppliers were asked to rate various levels of satisfaction about the contractor’s services (KPI-3) and products about the contractor’s services (KPI-3) and products (KPI-4). According to the definition of customers sug- (KPI-4) on ten point Likert scales (from 1 = ‘extremely gested by Mallak et al. [33] and Vietnamese business less than expected’ to 10 = ‘extremely better than environment, customers in this study are project owners expected’). For example, as shown in Table 3, the score and capital suppliers. The detailed measures of KPIs of each contractor corresponding to the sub-indicator S- are discussed in the next section. Since adequate data 01 (cooperation with the owner) of KPI-3 is then com- and useful data play a crucial role in achieving a good puted as follows:
  6. 6. V.T. Luu et al. / International Journal of Project Management 26 (2008) 758–769 763 KPIs An internal A competitor 1 A competitor 2 organization (HBC) (CotecCons) (CIC8) Sub-indicator 1 Sub-indicator 2 Cross-case synthesis using marks Sub-indicator … Sub-indicator n Identify and record the actual PMP of the internal organization (CIC8) and the best practice of competitors. Analyze the differences in PMP between the internal organization (CIC8) and competitors Make minor modifications in order to apply the best practice of competitors to the internal organization (CIC8) Fig. 3. Data analysis for benchmarking PMP. Table 3 4. Analysis and findings Respondents’ evaluation about ‘Cooperation with the owner’ sub-indica- tor S-01 (KPI-3) 4.1. Discussion of major KPIs Organization No. of Respondents’ evaluation using 10- Score responses point Likert-type mark (S-01) By applying the realities of VCI, major KPIs can be 1 2 3 4 5 6 7 8 9 10 discussed to uncover what behind the respondents’ judg- CIC 8 5 1 2 2 5.2 ment on KPIs. The order of KPIs in this section does HBC 5 1 2 1 1 6.4 not imply priorities in term of performance. Table 2 rep- CotecCons 5 1 1 2 1 7.6 resents descriptions of nine KPIs that may be considered as major indicators to measure PMP. These KPIs may reflect the current tendency for the choice of performance 1Ã4þ2Ã5þ2Ã6 indicators in Vietnam. The construction cost perfor- CIC8 scoreðS-01Þ ¼ ¼ 5:2 5 mance (KPI-1) and construction time performance 1Ã5þ2Ã6þ1Ã7þ1Ã8 (KPI-2) were highly evaluated as major indicators to HBC scoreðS-01Þ ¼ 5 measure PMP. These indicators not only show the spent ¼ 6:4 time, but it also describes the efficiency in the project management. Two next indicators are the satisfaction 1Ã6þ1Ã7þ2Ã8þ1Ã9 of customers about the service (KPI-3) and products CotecCons scoreðS-01Þ ¼ 5 (KPI-4) which are also highly evaluated by respondents. ¼ 7:6 This implied that the customer satisfaction is considered as an important performance indicator in the current According to these scores, the gaps and good practice in business environment in Vietnam. Normally, customers PMP of CIC8 and competitors have been addressed. Nev- expect the project completion as planed, quickly, inex- ertheless, site observations, reviewing historical project pensively, and at the best quality possible whereas capital documents and qualitative observations were integrated suppliers want more information for assessing the risk of to validate reliability of collected data. Similarly, based their investment [33]. As a result, construction products on corresponding sub-indicators, KPI-5, KPI-6, KPI-7, and services in developing countries must meet those KPI-8, and KPI-9 were measured using five-point Liker requirements. scales. By similar calculations, the scores of these KPIs Furthermore, the contractors need to own an efficiency and sub-indicators were then averaged to highlight the best system of quality management in order to have products practice among contractors. Since ‘‘the main finding from that may meet owners. Therefore, the performance of qual- the analysis phase must be communicated and gain the ity management system (QMS) has got the high rate acceptance of the involved persons, otherwise the study will responses. The quality of the project is recognized as one not be successful’’ [6], all findings were represented to top of important indicators which owners concern for. That managers so as to come up a commitment to practice. is not only an important criterion for the growth of a con-
  7. 7. 764 V.T. Luu et al. / International Journal of Project Management 26 (2008) 758–769 tractor but also a ‘‘touchstone’’ for measuring the subsis- tence and the reputation of contractors. CotecCons 2% The project team performance (KPI-6) is rather highly evaluated. Most responses agreed that a well-synchro- nized and effective project team will bring out many Contractors advantages leading to project’s success. In Vietnam, the HBC 5% dispute between the owner and the contractor that caused delays in payments by owners are common. Due to the lack of experience, contractors cannot fore- cast modifications and contingencies during construction CIC8 35% phase. In addition, most Vietnamese contractors have no effective system which can record changes at the con- 0% 5% 10% 15% 20% 25% 30% 35% 40% struction site. Especially, contracts usually omit or The percentage of construction time variation loosely mention about this matter. Hence, the change management performance (KPI-7) was considered as an Fig. 5. The construction time performance among contractors (2004– 2005). indicator to measure PMP. Two last items in Table 2 are the material management (KPI-8) and the labor safety management (KPI-9). Material cost is a main ele- ment of total construction cost, thus an efficient manage- The CotecCons used the specialized software to estimate ment of materials will bring forth much competitive quantities for projects and calculate the unit price for advantages to contractors. Moreover, the stakeholders these items and then a final price. The firm established paid more and more attention to safety management per- a contract group to prepare contract documents, to formance. It is widely accepted that labor safety yet manage actual construction cost, to monitor material strongly affects on the construction productivity, there- prices, to calculate unit prices, and so on. This group fore, labor safety management is rated as an indicator consisted of excellent quantity surveyors and experts for measuring PMP. who have thorough understanding of material prices, estimation techniques, contract types and construction 4.2. Lessons learned for improvement of construction cost technology. This resulted in high accuracy estimations performance (KPI-1) and time performance (KPI-2) and in effective cost management. CotecCons also appointed professional cost engineers to the projects. Figs. 4 and 5 indicate that CotecCons obtained a lowest These cost engineers are fully responsible for cost man- average percentage of cost-overrun and time-overrun agement at site and have thorough skills so as to moni- among contractors. Therefore, the CotecCons’s best prac- tor construction costs; tices in KPI-1 and KPI-2 were identified to recommend Project planning and scheduling were undertaken by how the CIC8’s performance should be improved. Based experience experts who can apply MS Project to assign on the integration of historical project documents, the site resources and costs, track the project’s performance, observation and the field survey, the following best prac- review a current project status, and analyze performance tices of CotecCons were recoded: with earned value analysis. The task force was estab- lished timely to intervene into time management at site in urgent situations; Weekly meeting, even daily meeting in urgent cases, was held with parties so as to solve problems occurred at construction sites. The meeting agenda is well-prepared CotecCons 0.60% to avoid waste time. In addition, sub-contractors and vendors were required to submit weekly schedules for daily monitoring. Moreover, valuable lessons were doc- Contractor umented so that the lessons learned from completed pro- HBC 1% jects can be used to manage changes and improve its performance; To accelerate construction work, the CotecCons has CIC8 5% launched appropriate campaigns and the incentive wage to promote emulative spirit among workers. Also, tech- nical training courses are usually provided to workers 0% 1% 2% 3% 4% 5% 6% and on-site engineers as a solution to remove main The percentage of construction cost variation causes of delays such as inadequate experience, impro- Fig. 4. The construction cost performance among contractors (2004– per planning, poor site management, inappropriate con- 2005). struction methods, and improper monitoring.
  8. 8. V.T. Luu et al. / International Journal of Project Management 26 (2008) 758–769 765 Unfortunately for the CIC8, it is quite the reverse. For 4.4. Lessons learned for improvement of QMS performance example, CIC8 appointed no capable engineer to under- (KPI-5) take cost management at sites and had no meeting to learn from completed projects. Furthermore, loose cost control, HBC, as shown in Table 5, had highly scores with Q-04, poor material management at site, careless choosing sub- Q-05 and Q-07 sub-indicators, while CotecCons had highly contractors were the other causes of poor construction cost score in Q-01, Q-02, Q-03 and Q-06. Accordingly, the fol- management at CIC8. The bad performance of CIC8 lowing best practices in PMP of both competitors were resulted from the following causes: (1) planning and sched- identified: uling were undertook by un-experienced engineers who only use a bar chart to control; (2) non-synchronizing CotecCons established the Department of quality man- between costs and resources; (3) non-periodic meeting at agement that has undertaken quality management activ- sites; (4) slow decision making; (5) poor communication ities. The head of this department is fully responsible for and relation among parties; and (6) no technical training the quality management system and directly reported to course to employees. A recent study on large construction a general manager. This department has the power to projects in Vietnam [46] also confirmed above problems. carrying out periodical or sudden inspection on the con- struction site in order to discover defects and deal with 4.3. Lessons learned for improvement of customer problems occurred in the performance of QMS. Due satisfaction (KPI-3 and KPI-4) to providing technical training to employees, most employees have the thorough understanding of quality Table 4 represents customer satisfaction about the per- management knowledge, and then these bring out the formance of all contractors. There are two kinds of cus- best practices in QMS performance. tomer satisfaction involved in the study. The first one is HBC used professional forms and procedures continu- the satisfaction in terms of construction products including ally improved in order to ensure the appropriateness the quality, wholesale price, material, and aesthetics. The of QMS. To facilitate to practitioners’ works, the fol- second-one is the satisfaction of customers about services lowing issues are included in each procedure: standards of contractors such as the efficiency of communication, are well described; how defects are tracked out; who is the transparency, the readiness to solve problems during responsible for under-qualified products, how to check a construction phase. CotecCons, as shown in Table 4, and take over construction works. Questionnaires that have obtained best performance with the sub-indicator’s were usually sent to customers during construction score was a range from 6.8 to 8.4 whereas CIC8 only phase helped HBC to gain the owners’ assessment about gained from 3.8 to 5.8. The performance gap analysis indi- construction process and quality. cated that customers have less satisfied with scheduling per- formance, aesthetic, site management of CIC8. Since Since most scores were less than 2.0 (Table 5), CIC8 customer satisfaction is an elusive concept related to vari- obtained bad performance in QMS. Although CIC8 ous aspects of human perceptions [49], CIC8 must adapt received certificate of ISO 9001:2000 but the QMS imple- itself to the best practices of competitors discussed in other mentation is only very strict at office whereas very lax at sections to improve above bad performance. site. Lack of QMS training was also provided to employ- ees. Procedures and forms were too difficult for workers Table 5 Respondents’ evaluation about the QMS performance at site (KPI-5) Table 4 Respondents’ evaluation about KPI-3 and KPI-4 Coding The score of sub-indicators CIC8 HBC CotecCons Coding The score of sub-indicators CIC8 HBC CotecCons Q-01 Radical application of QMS into 2.0 3.6 3.8 projects KPI-3: The customer satisfaction on the contractor’s services Q-02 All project staffs are imparted and 2.6 3.6 3.8 S-01 Cooperation with the owner 5.2 6.4 7.6 they have a thorough S-02 Organization and administration 4.4 6.2 7.6 understanding of QMS at site Q-03 The implementation of QMS by 1.8 3.6 3.8 S-03 A sense of responsibility 5.8 7.4 8.0 staffs S-04 The provision of solutions to solve 5.4 7.2 8.4 Q-04 The appropriation of procedures 2.0 4.0 3.8 defective works and forms for projects KPI-4: The customer satisfaction on the contractor’s products Q-05 The continuous improvement of 2.0 4.0 3.8 S-05 Construction schedule 3.8 6.2 6.8 procedures and forms in order to performance be suitable for projects S-06 Construction quality 5.0 6.6 7.4 Q-06 The audit of QMS at the project 1.8 3.6 4.0 S-07 Aesthetic of construction products 4.8 7.6 7.4 level S-08 Construction materials and 5.0 7.0 7.8 Q-07 Activities of QMS towards 2.0 4.0 3.8 equipments customers
  9. 9. 766 V.T. Luu et al. / International Journal of Project Management 26 (2008) 758–769 and foreman to understand. In addition, inadequacy of site Well-prepared and careful-considered articles of the inspection and paying inattention to the customer feedback contract are valuable lessons, especially in the article were also causes of bad QMS performance. of changes. These will eliminate disputes among the par- ties in construction phase. This organization strictly fol- 4.5. Lessons learned for improvement of project team lows the slogan ‘as more specific and more detailed in performance (KPI-6) contract documents as easily avoiding disputes in the future’. ‘‘The Federation Internationale Des Ingeni- Most sub-indicators with highly scores fall into HBC eurs-Councils (FIDIC) form of contract is mainly used (Table 6), thus the following HBC’s best practices were dis- with modifications to meet local laws and project covered to come up improvement of CIC8’s performance: requirements’’ [47]. It should be noted that Vietnam economy has just transformed from centralized into The project team established at the project commence- market economy, thus the FIDIC form of contract is ment is staffed entirely by competent employees. The unfamiliar with Vietnamese contractors. The project HBC provided for the policy and procedures that help team recorded all changes and then timely informed to the team members in doing their jobs. Objectives, the project parties about possible impacts to time and responsibility and authority of project team clearly stip- cost, and how to solve them. Moreover, the team also ulated through processes, procedures, and rules, thus the kept a record of changes and their affects to provide HBC’s project team performance is highly evaluated. All valuable lessons for other projects. members of the project team clearly understand their CotecCons applied an effective procurement system, role in the success of projects. As a result, they whole- including well-prepared material procurement planning, heartedly work with full responsibility for given tasks. clear-documented solicitation, transparent choosing Team work is first in their operation. among potential suppliers, and well managing the rela- tionship with suppliers. It is notably to mention that The CIC8’s performance is different from the HBC’s one. good material management of CotecCons results from The project team consisted of incompetent employees. The an appropriate site layout plan, a careful investigation, top management paid inattention to the role and responsibil- strict conformity with ISO 9001:2000, perfect processes ity of project teams. Furthermore, the bad performance of of receiving and delivering materials at site, and a com- project teams in CIC8 also resulted from other sources such puterized material planning to optimize the material as inadequate policies and procedures that involved in per- reserve at site. forming given objectives of project management, lack of CotecCons has also provided safety training to all communication among staffs, no human resource manage- employees and then issued safety certification. Only ment plan at sites, unclear responsibility among staffs, and engineers and workers who have a safety certification slow making decision in construction phase. may work at sites. Since safety procedures well planned, monitored, controlled may continuously motivate 4.6. Lessons learned for improvement of change management employees for safely carrying out the work [48], formal (KPI-7), material management (KPI-8), and labor safety instructions on safety procedures have given to all (KPI-9) performance employees before doing any activity. In addition, Cotec- Cons has sufficiently provided personal protective The results in Table 7 indicated that CotecCons equipment, and strictly disciplined the persons who vio- obtained the best performance among contractors, thus lated the safety regulation. Safety officers, who has full the following the best practices were documented: responsible for safety planning, inspection, reporting and for imparting safety procedures to workers, was Table 6 Respondents’ evaluation about the project team performance at site (KPI-6) assigned to each construction site. Coding The score of sub-indicators CIC8 HBC CotecCons Conversely, CIC8 always encounters delays of material P-01 The establishment of the project 2.0 4.0 4.0 delivery because of inappropriate site layout, poor material team P-02 Top management support to the 2.0 4.0 3.6 planning, and the inconformity of ‘receive and deliver project team materials’ process with acceleration. CIC8 also assigned P-03 The clear stipulation of objectives 2.0 4.0 3.6 safety officers and provided safety instructions but it was of project team, responsibility and formalism. As a result, safety is often violated and rarely authority. mentioned in weekly meetings. P-04 The obvious procedures in the 2.0 4.0 3.6 project team activities Finally, ‘‘simply identifying the best practices without P-05 The obvious definition of role, 2.6 4.0 3.8 importing them to ones own organization is not bench- rights and duties of each member marking’’ [6], thus lessons were given to the CIC8’s top of project team managers as recommendations for improvement. They P-06 The degree of teamwork among 2.6 4.0 3.8 adapted their performance to the competitors’ best prac- members tices. However, if an organization gets no benefits, it will
  10. 10. V.T. Luu et al. / International Journal of Project Management 26 (2008) 758–769 767 Table 7 Respondents’ evaluation about KPI-7, KPI-8, KPI-9 among contractors Coding The score of sub-indicators CIC8 HBC CotecCons KPI-7: The change management performance at site CH-01 The obvious stipulation for articles and procedures in contracts to manage changes 2.0 3.4 4.0 CH-02 Approving changes before it is done 2.0 3.6 4.0 CH-03 Keeping a record of changes during construction phase 2.6 3.6 4.0 CH-04 The timely information to project team 2.6 3.8 4.4 CH-05 The timely action of project team to changes 2.4 3.6 4.0 CH-06 Keeping a record of changes and its affects as lessons learned for other projects 1.6 3.0 3.4 KPI-8: The material management performance at site Material provision planning M-01 The harmony in material management between the construction site and the company level 2.4 4.0 4.0 M-02 The effectiveness of material management plan 2.6 3.6 4.2 M-03 Radical application of material management plan in construction phase 2.6 3.6 4.2 M-04 The transparence in evaluation suppliers 3.2 4.0 4.4 Material management in construction phase M-05 The degree of computerization in material management 2.0 2.6 3.6 M-06 The effectiveness of material management at site 3.0 3.4 4.0 M-07 The effectiveness of keeping a record of material usage and inventory 2.6 3.2 3.6 M-08 The strict supervision in receiving and delivering materials at sites 3.0 4.2 4.4 KPI-9: The labor safety management performance at site L-01 Radical implementation of safety management at construction sites 3.4 4.4 4.8 L-02 Project management always gives priority to safety in periodical meetings 2.4 4.0 4.8 L-03 Safety plans are well-prepared by site engineers. 2.0 3.4 4.0 L-04 Strict discipline and rewards in safety performance 2.0 3.4 4.0 L-05 Providing personal protective equipment to workers 3.0 4.4 4.6 do nothing to change their own process [7]. ‘‘Benchmark- aligned in practices to make a qualitative judgment on suc- ing would be useful to the industry in achieving the 30% cess of construction projects in developing countries. In cost reduction’’ [8], as a result the study considered cost practice, owners may use proposed KPIs to evaluate poten- reduction rate as a criterion for benchmarking effective- tial contractors by requesting these indices. Particularly, ness. Because of the time limitation of research conditions construction companies may judge their own operations from sponsors’ requirement (within 6 months), the finan- to determine concurrently their strongpoint and weakness, cial measurement indicated that cost reduction rate is and afterward to improve their performance. The large approximately 14% after making changes in the own orga- contractors may also consider the aforementioned best nization (CIC8). This rate is less than an expectation rate. practices as lessons learned for their projects. The findings However, it is widely accepted that construction products suggest that benchmarking approach can help construction have long fife cycle, thus 6 months are too short for bench- firms to compare their performance to competitors, to marking to evaluate its effectiveness. learn from the good practices of others and to carry out changes for continually improvement. Moreover, the 5. Conclusions results also encourage practitioners to benefit from the benchmarking. The major objective of this paper is to explore the appli- Limitations are unavoidable although extensive efforts cation of benchmarking approach for improving the pro- were taken into this study which is focused on residential ject management performance (PMP) among large construction projects where other civil engineering pro- contractors in Vietnam. A conceptual framework was jects were not included. Further studies may be extended developed in general to realize the benchmarking study by including more KPIs and sub-indicators. This on PMP. Nine significant KPIs were used as major indica- research used the case studies of three large contractors tors of PMP for construction projects from the contractor’s to validate its conceptual framework and to exemplify viewpoint. The typical three large contractors are involved its application. Thus, the generalization for other similar in this research to benchmark the effectiveness of PMP. contractors may be impossible. Future studies should Above KPIs were insightfully verified and applied into 15 apply the proposed conceptual framework to other con- selected building projects. The sub-indicators correspond- struction projects so that benchmarking approach may ing to each of KPIs are discover so as to facilitate for prac- prove its usefulness in project management improvement. titioners in measuring PMP. Qualitative and quantitative Findings seem to be localized, however the approach in measures were use to come up the scores of KPIs. this research is general thus it may be applied to other Identified KPIs uncovered which KPIs are important to construction projects or contractors with minor ensure high levels of PMP, and which ones should be modifications.
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