Construction Management in Developing Countries, Lecture 9, Society and construction project management, PPP, BOOT, social expectation, environmental consideration, land acquisition, and youth issues in construction project management

1. Society and Construction Project
Management (Part I)
(in Developing Countries)
6 hours
Hari Krishna Shrestha
Center for Postgraduate Studies
Nepal Engineering College
Changunarayan, Bhaktapur

2. Project Investment Models:
Increase in private investment
Investment Models: BOT, BOOT, PPP, and others
Bank and financial institutes’ involvement in Construction Projects: Rate of interest
Public project investment
Private project investment
Pre construction Activities: Social considerations: Construction Project Engineering
and Administration, Chapter 7
Bidding complexities and e-bidding
Bid bond and their conditions
Site visit by the bidders, bid preparation by the bidders
Study of tender document
Completeness of tender document and ambiguities
Increasing expectations: Employer’s expectation – universal knowledge
Stringent environmental parameters
Meeting Project objectives
Expectation of high quality and accepting low bids
Hope of zero accident and willingness to spend
Involvement of users’ community during project planning and development

3. 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

4. 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+mod
el+of+investment+in+hydropower&newsid=MTI3NQ==
• Further Reading:
http://en.wikipedia.org/wiki/Build%E2%80%93operate%E2%80%93transfer

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

6. • 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

7. 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

8. 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. Billion
Industry 32.1
Construction 23.49
Wholesale/retail 45.94
Transportation/Communication/Public Utility 3.45
Source: Nepalpatra Weekly, Sept 6-12, 2014, Vol. 23, No. 20,

9. 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, …

10. Private Project Investment
• FNCCI, IPPAN
• Private individual and groups investing in hydropower
has increased
• Private parties in PPP projects
• Private investment in BOOT projects
Problems of private investment
• Difficulty in land acquisition
• Changing laws, rules, regulations, fee
• Political instability, local politics
PDA: 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

11. 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)

12. 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

13. 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.

14. Regulating and Monitoring Capacity Building for
Environmental Impact Assessment (EIA) of
Hydropower Project in Nepal
A Guide to
Environmental Auditing of
Hydropower Projects
Government of Nepal
Ministry of Environment, Science and Technology
With the assistance of
Royal Norwegian Government
and technical assistance of
Norwegian Directorate for Nature Management
Kathmandu, Nepal
September 2006

15. Meeting Project Objectives
Evaluation of whether a project met project
objective are conducted through:
• Technical Audit
• Environmental Audit
• Social Audit
• Financial Audit

16. 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.

17. 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.

18. 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).

19. Society and Construction Project
Management (Part II)
(in Developing Countries)

20. 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.

21. 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

22. 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, …

23. 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.

24. Problems affecting land acquisition
a) 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

25. EHS: Environment, Health, Safety Issues

26. Contractor Mobilization
During 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

27. Incorporating Peoples’ Demand
Feasible 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.

28. 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.

29. Labor Issues
• Labor Act 2048
Working 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.

30. 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.

31. 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

32. Environment, Health and Safety (EHS)
1. Environmental
1.1 Air Emissions and Ambient Air Quality
1.2 Energy Conservation
1.3 Wastewater and Ambient Water Quality
1.4 Water Conservation
1.5 Hazardous Materials Management
1.6 Waste Management
1.7 Noise
1.8 Contaminated Land and Remediation
1.9 releases to water
1.10 releases to land
1.11 use of raw materials and natural resources
1.12 energy emitted, heat/radiation/vibration
1.13 waste and by-products
http://en.wikipedia.org/wiki/Environment,_health_and_safety

33. EHS
2. Occupational Health and Safety
2.1 General Facility Design and Operation
2.2 Communication and Training
2.3 Physical Hazards
2.4 Chemical Hazards
2.5 Biological Hazards
2.6 Radiological Hazards
2.7 Personal Protective Equipment (PPE)
2.8 Special Hazard Environments
2.9 Monitoring
http://en.wikipedia.org/wiki/Environment,_health_and_safety

34. 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

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

36. Application of project management
tools
• CMP
• PERT
• MS Project
• Primevera
• Project Management
Current Status of application of project management tools in Nepal

37. 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

38. 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.