Evaluating Risk Management Perspectives of Parties in Construction Projects Funded by Vietnam Government’s Budget

1. INTRODUCTION

In Vietnam, the Government’s budget capital mainly focuses on investment in the construction of technical, economic and social infrastructure systems. Annually, the investment capital for these contents always accounts for over 20% of the total Government’s budget expenditure (Table 1). The value of infrastructure investment has reached an average of about 5.7% of GDP. The capacity of the irrigation infrastructure system is focused on investment in construction and upgrading in the direction of multi-purpose. The traffic system is expanded and completed with many projects of radial traffic axes, ring roads, stereoscopic intersections at major intersections, urban bypasses, especially the belts and roads and urban railway. The works of water supply, drainage, solid waste collection and treatment are also renovated, upgraded and newly built. Many investment projects to build educational facilities have been implemented, even in ethnic minority and disadvantaged areas.

The peculiarities of construction investment projects are often emphasized by the parties involved [2, 3]:

• Prototypical properties of the building because each place and environment is different;
• The richness and diversity of the number of parties involved;
• The duration of the project increases the likelihood of events that significantly affect dispersion performance (standard change, target change ...), economic, political, social constraints, etc.

To face with rapid construction speed, risks also appear frequently and have a clear influence on project results. 100% of projects have big or small risks that change the work plan. In fact, over budget and behind schedule are common phenomena in construction, especially for complex projects in Vietnam. Today, managers have a more optimistic view of risks, and instead of trying to eliminate risks, managers want to face and find suitable risk countermeasures. The basis for developing risk response measures is to properly assess the impact of risks on project outcomes.

2. LITERATURE REVIEWS

There are risks that are objective, but there are risks posed by project stakeholders. Results from relevant studies show that risk occurs in all project implementation activities. Perrenoud et al., (2016) [4] reviewed more than 229 projects that recorded 1229 risks. Batson (2009) [5] discovered 15 risk areas that were used to manage 96 potential risk issues. Bruce (2005) [6] studies the effect of risk on the cost of infrastructure projects. And many other studies around the world have shown that risks are inevitable in construction investment projects. Besides, if considered from the viewpoints of the project parties, risks will have many different points in risk assessment and response. Edwards et al. (2009) [7] also point out risks related to the relationship of project participants and show that the risk opinions of the parties do not always lead to the same outcome.

In Vietnam, risk management is getting more and more attention as economic integration and investment projects increase in size and number. However, through some research by Thuy (2020) [8], Anh (2006) [9], Trang (2010) [10], also reflects many risks arising in the process of implementing projects using capital sources. There are risks with a high degree of frequency and significant impact on the outcome of the project. There are also risks that are less visible and easier to deal with.

Within the scope of the research, the author will focus on the risks that have been commented through related studies that frequently appear and have a clear influence on the results of construction investment projects using Vietnam Government’s budget capital (Table 2).

3. RESEARCH METHODOLGY

4. DATA ANALYSIS RESULTS

5. RISK MANAGEMENT VIEWPOINTS OF THE PROJECT PARTIES

With the results obtained in the above steps, it is found that the three project subjects have differences in the assessment of the impact of risks on the project results. Beta index indicates the degree of influence of the risk on the project outcome is high or low; the higher this index indicates, the higher the degree of influence and vice versa. At the same time, the Beta of a risk with a higher index also indicates that the risk has a stronger influence on the outcome of the project than the risks with a lower index. The table below presents the results of the impact of risks on project outcomes from the individual perspectives of project actors.

From the results of Table 16, it is possible to summarize the following contents:

(1) With 13 risks considered in the study, all parties assessed them to have a positive influence on the project results expressed through the Beta indexes all received positive values. Thus, the risks that occur will jeopardize the results of the project, such as cost loss or delay or deterioration in quality or the simultaneous occurrence of these problems. On all three groups of experts from the investor, consulting unit, and contractor, all reported that they had not encountered any risks that brought positive results to the project. All risks are associated with negative connotations.

(2) Assessing the level of impact of risks on the project results of the contractor is higher than that of the investor and the consulting unit. According to experts from the contractor side, risks happen to the project, but the contractor is the unit that directly creates the project's products, which are construction works. The investor and the consulting unit are indirect parties. Therefore, when the risk occurs, the contractor will be most clearly affected. Especially in the project implementation phase, the contractor's workload is very large, and the damage caused by the risk can be expressed in very specific numbers.

(3) The investor and the consulting unit have a quite similar assessment of the impact of risks on project results. There is not a big difference between the score for 13 risks between the investor and the consulting unit. Opinions from the experts of the investor and the consulting unit emphasize: The consulting unit has an advisory role, helping the investor to make specialized decisions in the project. Therefore, the benefit of the investor is also the benefit of the consulting unit. In projects using Government’s budget capital, the rights and responsibilities of the consulting unit are very clear through the legal regulations, so there is little conflict between the investor and the consulting unit. That also affects the perception of risk of these two subjects is quite similar.

(4) The risks assessed by the investor as having high impact include: Poor organization and coordination among the participants; management capacity of the investor is weak; Contractor's construction capacity is not guaranteed; Quality management processes and measures are not guaranteed; price movements of inputs. The investor is interested in issues in site coordination, capacity of project parties, quality assurance process and price fluctuations in the market. Experts from the investor said that they want to create a suitable relationship with the project parties in order to capture clear project information and understand the requirements to ensure construction work, a content they do not have much knowledge and experience in. However, construction works with many jobs in many different fields cause investors to lose control of activities or interfere deeply in the work of the parties.

The weak capacity of the project parties is the source of the wrong decisions in the project. With Government’s budget funding, the contractor selection process complies with many strict and detailed regulations that help limit the selection of incompetent contractors. But the reality shows that the main contractors can meet the capacity, but their subcontractors have the weak capacity, leading to many damaging consequences for the project's results.

In addition, construction supervision in construction investment projects with Government’s budget capital accounts for a large proportion using the form of package contracts. This means that price movements do not change the contract value. Price fluctuations are borne by the contractor. However, the opinion of experts from the investor reflects: The price fluctuation in the market affects the contractor's time, thereby directly affecting the project. For example, in 2021, the price of construction materials will increase, iron will increase by 30-40%, aluminum and glass will increase by 20-30%, etc. material prices will be more stable. Excessive price increases also force contractors to question whether they are profitable anymore, leading to delays in project implementation.

(5) The risks assessed by the consulting unit as having a high impact include Poor organization and coordination among stakeholders; management capacity of the investor is weak; contractor's construction capacity is not guaranteed; quality management processes and measures are not guaranteed; funding for projects facing difficulties; delayed payment as committed. The consulting unit has a highly similar assessment with the investor. The experts from the consulting unit have many explanations similar to the experts from the investor. Their reflection also shows that they pay great attention to the issue of capital. The pandemic that took place from 2020 to 2022 has aggravated the problem of capital sources at projects. Contingency costs have been cut, and funding has been delayed compared to the plan, and social distancing issues have prevented many projects from having to pause or make payments as committed.

(6) The risks assessed by the contractor with high impact include: Changing the design many times; Delays in approval and licensing; Delay in handing over the construction site; Poor organization and coordination among the parties involved; Funding for the project being difficult. The risks assessed as high impact reflect the contractor's concerns about issues around design changes, construction sites, project coordination, and funding. Experts from the contractor said that this result is reasonable and close to the current reality. In many construction investment projects using Government’s budget capital, there is always a very frequent design adjustment. These adjustments do not change the structure of the work, but it takes a lot of time to prepare drawings and wait for the approval. When there is a design change, the contractor will be responsible for preparing a drawing to change the menu of the project management consultant, supervision consultant and investor. When approved by the investor, the new contractor can perform at the construction site. Compared with the original plan, the contractor can easily calculate the damage caused by the number of days behind schedule of the work; costs of engineers' salaries, labor used for design changes, adjustments, etc.

Currently, the coordination on the construction site is not really effective. Experts found that the coordination model on the construction site often takes place in many stages, and the rights and responsibilities of the parties often overlap, leading to the investor being too deeply involved in the expertise of the supervision consultant and contractors. Meanwhile, project management consultants cannot determine when they decide for themselves or need advice for the investor to decide. This will make the operation on the construction site between the parties not really smooth and time-consuming.

Government’s budget capital for construction investment accounts for a large proportion and is allocated in the medium-term capital or from the pre-prepared regular capital. However, the investor is not usually the one making the investment decisions. The investor is only the manager of the allocated capital. In the situation that the Government’s budget has to cut and save costs, there may also be an objective reason from the investment decision maker, the source of capital is interrupted or delayed. This will cause many difficulties for the project parties and especially the contractor.

(7) The risk of “Poor organization and coordination among the participants” is unanimously assessed by all three project stakeholders as high impact. This risk shows that there is a need for a drastic change in coordination among project parties to limit negative impacts on project results.

CONCLUSION

Risks are unavoidable in construction investment projects. Project parties need to properly assess risks and develop appropriate responses. Reviewing over 13 risks that frequently appear in construction investment projects using Government’s budget capital has shown many interesting points in the risk management perspective of the project parties. The occurrence of risks undermines the outcome of the project. The investor and the consulting unit have similar but lower evaluations than the contractor's assessment. The coordination in the project is a weak problem and is recognized by all parties in the project. The analysis results of the linear regression model based on the views of the investor, consulting unit, and contractor also lead to the following predictions:

• It is necessary to improve and build a model of coordination between the parties in the project in a scientific and reasonable manner.
• From the perspective of each risk subject, it can be viewed in different ways, but the risk is the loss of the project, thereby affecting the subject itself, so the parties in the project consider to find a common voice in risk management.

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