TUESDAY 9 OCTOBER, 2007 Project Management - Setting the Standard

1. CS3.3.2 The Project Management Consultant in Chinese Construction Industry – The Roles and Responsibilities Jian Zuo Presented by Tony Ma TUESDAY 9 OCTOBER, 2007 Project Management - Setting the Standard Australian Institute of Project Management National Conference 2007 Hobart Tasmania October 7 – 10, 2007

2. THE PROJECT MANAGEMENT CONSULTANTS IN CHINESE CONSTRUCTION INDUSTRY – THE ROLES AND RESPONSIBILITIES JianZuo Presented by Tony Ma University of South Australia

3. The purpose of this paper is to • Review the project management practices in Chinese construction industry in the past decade; • Investigate the roles and responsibilities of PM consultants by means of semi-structure interviews • Make suggestions on how Chinese practitioners can improve the project management practice to a better extent

4. Chinese Construction Industry • Ever since the economic reform with the ‘open door policy’ from 1978, there has been a rapid growth in China’s economy. • In 2003-2004, the total value of production brought about by the construction industry reached RMB 957.2 billion (~US 115.65 billion), contributing 7% to the Gross Domestic Product • China’s construction industry is under the overall control of the central government

5. Relevant Government Authorities • The Ministry of Construction (MoC) and the National Development and Reform Commission (NDRC) share the leadership and administration of the construction sector. • The MoC was established in the late 1980s to implement new strategies for developing the industry. Their responsibilities include formulating policies, preparing development programmes, monitoring implementation, training personnel, improving construction technology and managing standards, surveys, design and construction institutions.

6. Relevant Government Authorities • The National Development and Reform Commission (NDRC), is a macroeconomic management agency under the State Council, and formulates policies for economic and social development, manages macroeconomic policy and guides overall economic restructuring.

7. Relevant Government authorities • Source: www.gov.cn, Adopted from Luo and Gale, 2000; Xu et al., 2004

8. Traditional approach of management • a “Project Headquarter”is established to take charge of the whole construction project process on behalf of the client. • Features: • a temporary organization • consist of in-house staff of the client from various departments • Managers often have a general management background – lacking technical knowledge • Lessons learned from the project cannot be retained or transferred • Not unusual to have project overrun in time & cost • Lack of transparency & can lead to corruption

9. Supervision Engineer (Construction Supervision unit) • The MoC introduced a legal requirement to appoint a Supervision Engineer for all construction projects in China since the implementation of the Provisional Construction Supervision Ordinance in 1988. • is responsible for supervising the works of a construction project (e.g. quality, schedule, etc.) from the inception phase through to completion.

10. Project Management Consultant • In 2003, the MoC issued a document aimed at encouraging the industry to adopt the Engineering-Procurement-Construction (EPC) or Design & Build (D&B) approach and to promote the engagement of a Project Management Consultant (PMC) to manage the project on behalf of the client • the PMC is employed directly by the client to manage the entire project from its inception to completion.

11. Project Management Consultant • Acting on behalf of the client, the PMC is authorized to manage the project and ensure that it achieves its objectives. • An incentive scheme is often used to encourage the PMC to perform e.g. the PMC can be paid a certain percentage of an incentive pool if his actions result in cost savings

12. Standards for Project Management Consultants • Guiding Opinions on Cultivation and Development of Project General Contracting Enterprises and Project Management Enterprises [7] • Trial Measures on Construction Project Management [8] • The Code of construction project management, GB/T (Recommended national standards) 50326-2006 [9]

13. Research findings by Interviews To understand more of their roles and responsibilities in practice, in-depth semi-structured interviews were conducted: • convenience sampling • target population: senior managers of the major consultancy firms (construction supervision and project management consultant) in Beijing and Shenzhen • 11 were interviewed (more than 20 years of experience)

14. Roles and responsibilities of project management consultants • Conception phase • conduct the feasibility study • apply for various approvals • Design and construction phase • brief the client’s requirements and engage the design team • establish the project team (e.g. the construction supervision engineer, the design institute, the contractors, the suppliers) via tendering • develop the project management plan to control project objectives (e.g. cost, schedule, quality) • deal with claims and disputes • Post-construction phase • organize the completion check associated with relevant government authorities, client representatives, supervision engineer, etc. • post-occupancy evaluation

15. Comments: • It is no hard to find that these responsibilities overlap with those of supervision engineers very much, especially in the construction phase and post-construction phase. • one interviewee commented: “… it is not uncommon that the client does not fully trust the project management consultants… the intervene from client makes it difficult for project management consultants to manage the project.”

16. The issues/barriers of the application of project management in the local industry • The qualification of project management consultants – no PM qualification is required • There are just a few PM consulting firms who can provide various PM services • The responsibilities of project management consultants need to be defined clearly • Lack of regulation system • The fee scale of consultancy service • The use of modern project management tools and techniques

17. The way the current practice can be improved • Government’s initiatives - If the Government pushes the adoption of project management in more government-funded projects, practitioners in the private sector will be motivated to follow through. • Training the industry practitioners – PM principles • Assistance of foreign project management consultants - Ministry of Construction and Ministry of Commerce issue a joint document in January 2007 to encourage and regulate the entry of foreign investment firms when providing consulting services in construction projects.

18. Conclusions • The project management practice in the Chinese construction industry has achieved substantial developments in past decade. • The construction supervision engineer and project management consultants are on the way to replace the project headquarter to manage construction projects in China on behalf the client. • The major qualification is still in surveying and construction • The project management approach has yet been popularly used in the local industry. • There is still a long way to go for Chinese construction industry to adopt the principles of project management even with the support from the Government.