Part 7-3: Working Overseas, Advanced Civil Engineering, (NTUST, 5908701)
台科大高等土木施工學教材(2021) 

MT KAO (Blog: http://mtkaoforum31.blogspot.tw/)

(mtkaoforum31@gmail.com)  

7) License, Registration, Special Permit for Foreign Contractor

In many countries, the locals and the foreigners are not offered equal right in conduct business, owning property, or exercising civil rights. People from countries considered liberal enough sometimes are astonished at the restraint imposed on the foreigners at the places they go for works. But it’s normal there’re reasons out of custom, religion and history to justify the differentiation with foreign people or companies, who need to learn everything beforehand for what they can and what they can’t do according to the laws.

(1) For ownership on land, housing and factory:

Many countries don’t permit or only allow conditional and partial ownership for holding land, house or factory for foreigners. The reasons to deny or restrain is that the government and the people are still in fresh memory that the huge capital imported will overwhelm the locals and thus a new form of exploitation; And in certain area it will be labeled like come-back of the colonialism. Politically it will not be accepted.  

In certain nations, not only the foreigners won’t be granted for any property titles, also not all the citizens are treated equal. For example, that in Malaysia and Indonesia, natives identified as “Bumiputra” will have full right for property titles while those their ancestors emigrated over hundred years won’t have the same rights. 

For example, according to the law governing land holding in Indonesia, the Agrarian Law, title to land may be divided in two categories: Primary and Secondary. 

The category “Primary” further divided in 4: “freehold, does not have a validity period”; “the right for construction, valid for 30 years plus 20 years of the extended period with additional 30 years renewal period”; “the right for farming, is granted for the period of 25 or 35 years and may be extended for another 25 years”; “the right of use, granted for the period up to 25 years and may be extended for another 20 years”. 

And the category “Leasehold”, grant tenant right to construct and/or use buildings on the land owned by the primary ownership right holder during some fixed period of time. So, the foreign private persons and foreign legal entities, will use this to obtain the land for use of business purpose.

Normally, a foreign construction company signing the construction related contract with his Indonesian client needs to go through many local partners and sub-tier assistant for performance. For example, if he wants to set up inventories, fabrication shops, secure quarry and borrow sites, or build camp and office for staff, he need land and permit to run the minimum processing plants. And it has to be obtained by his local collaborators; with whom he must be establish trust and confidence; effort and expense that can be easily overlooked at tender stage.

(2) For business operation to sign the contract

The types of legal entities, for example, in Indonesia also divide into foreign-owned limited liability company PMA, local company (PT), representative office (RO). When a foreign entity wants to conduct the construction related business in the country, he needs to check the law whether it would grant PMA or RO to perform the works.

Technically, a foreigner is not permitted to have ownership of a local company (PT) in Indonesia, which should be only owned by Indonesian nationals. And the point is most of the public works will be tendered among PT. There may be remaining few for PMA and RO, but also require the joint operation between the foreign and local entities to safeguard the national’s interest. 

Because for PMA, the capital shall be sizable enough that the international contractors have to keep enormous money in a place where the chance for tendering may be rare. So, in practice, the foreign companies will have to select to open branch offices in Indonesia to qualify themselves for tenders open to foreigners, it’s so called RO operation. Compared to PMA, of which the liability is limited to the capital registered and paid up in local, RO operation means the mother company will sign and theoretically the debtors and claimers will be able to sue up to the home country. In the cases that the foreign companies need to joint operation with the locals, it seems risky for Representative Office to sign, and become guaranters of the local.

But unlike public procurement, the law doesn’t specify that the private companies are not allowed to sign with PMA or RO for construction or engineering works. For now, that BOT or BT are more popular than before and the ability to accomplish the critical works in an infrastructure project by renown foreign companies are widely recognized by stakeholders. The foreign companies may have more opportunity to assert themselves in the future.

Similar to Indonesia, many developing countries have the same ideas to protect native firms and guarantee the of the locals for employment. The requirement will be translated into the law and regulation that the foreign companies shall respect and understand.    

(3) To import the machine, permanent equipment and material

Countries are different in their pace, requirement and conditions to develop the economics. Sometimes, they pay whole attention to groom certain industries open the opportunity for foreign investment, and the other times they may design a negative list for outsiders as they deem the native production are worth for protection. 

Import permit and tariff rates are often used to fend off foreign competition. Additional review or cumbersome procedure may be imposed to procrastinate the import process if bureaucrat and business find custom duty alone may not be sufficient to guarantee the sales of the local products.

The local products will not be limited to material or manufactures; the equipment and facilities to be incorporated into the permanent works will also be the subject. The construction equipment and plants despite its temporary usage nature are also hindered in the process of construction mechanization because the labor employment need to be ensured .

However, the host country needs the loans for projects development more than their intention to nurture the relevant industries; they may go for the agreement with the giver international organizations or foreign governments in specified projects earmarking permits to import definite products, equipment and facilities as conditions of lending. Always the importation of construction machines will be included in such loaning agreement with the guarantees the construction equipment and plants will be re-exported after works finished.  

(4) To hire local engineers of required qualification and numbers

The host countries always want to minimize the impact to the national employment when they allow the foreign companies to undertake construction works. In general, labor employment is of less concern, because through immigration departments the number and quality of imported labor can be controlled and also the income and fees required to import the foreign labor will be more expensive than the locals.

But for both administrative and engineers, the issue to man the project is more complicated than calculating the cost difference in blending the foreigners with how many locals in what level of the hierarchy.

Usually, the contractors like to assign engineers and staff having long time work experience with them for projects undertaken. Because it’s clear they need to get familiar with the locals to be hired in the project for their unknown performance in technicality and personality; which will be converted into monetary terms not mentioning the possibility that the newly recruited will cause any incorrigible trouble. 

In particular countries like Singapore, the personal income is high or comparable to the expatriates, therefore the possibility existed that the general contractor may select third country personnel (TCN) to fill positions and thus not good to the employment of the educated. So, in most of the public work contracts the authority will ask the winning contractor to hire certain number of professionals, of which the definition is the citizens graduated from relative department with years of work experience. 

The sort of enforcement has tilted supply and demand between the employees and the employers, and in the worst case causing the difficulty to recruit local engineers in addition to pushing up the manning cost drastically in a country not so big. So, construction and engineering companies shall read the tender document and investigate the market closely.  

8) Acknowledge of difference and handicaps:

(1) Handicap in language.

People always think language problem shall be the most difficult part for working overseas, to certain extent, it’s true. But what make it big problem is the personality of the persons in charge of the works. Because the contract with the Client or subcontractor or vendors though may be written in local language, but translation can be made in English. And translators will be available in many cases and if the expatriates want to know the true meaning of everything from his counterpart that shall not be any problem.

English shall be basic for persons assigned for overseas works. We always see people complain about its complexity as foreign language; but it could be an excuse that people involved don’t have good work habit to read not because it’s a strange language. In other words, the same people may not read files and document in his own language very well, and their access to foreign contracts and works won’t be possible. 

If a person is anxious to know the project and how the assigned task proceed, he will try all means to interpret the situation for necessary actions; and the language shall not be a problem. If a person dedicates to his overseas work long enough, he may be able to conversant with different language, either English or local language; that’s why we say the language problem can be overcome.

However, company management shall establish criteria to encourage their staff to learn new languages, not necessarily only English, and we understand some companies in Taiwan have responded to people draw high score or obtain license in foreign language tests such as TOE, Thai, and Japanese.     

(2) Difference in cultural perception

Overseas construction or engineering works require big degree of interaction with local people, the contracts, deals or simply daily life are much influenced by custom, religion or politic. The foreign companies have to be aware that they’re actually surrounded by host of people in different culture.

Maybe there were the days that the local economic development lagged much behind the contractor’s country, that the foreigners always have feeling of supremacy and individuals will be proud of themselves and imbue disregard on the locals unknowingly. But thanks to the globalization and enhanced education, the locals in many countries get much confidence on tradition, religion and history.

And it means the people will be provoked for minor offence, among them, the most sensitive topic is religion. There’re many things that is sacrosanct and can’t be remedied in association with the belief. People working for any project, in any country shall be told to respect the believers for their religious activities even work efficiency at the expense. 

Understanding is the only approach for foreign people to appreciate different culture. It may be one way, but it is only one way especially foreign contractors can’t afford to work like aliens. 

(3) Difference in applicable code and standard

Every country has its own code and standard for engineering and construction, 

When the market size isn’t big enough so the country may not be able to establish their own rules, they follow the big country, usually consider the language, economic connection, geographical vicinity, or in the dramatic sense follow former colonial practice. 

Code and standard applied will determine how calculation and checks will be going on; and also, what the test and experiment shall be done. People have to get familiar with them because engineering work shall be carried out within months nowadays.

When construction or engineering companies go abroad, they have to determine before contract start whether or not they can deliver in time and in quality of the works; and it will affect the cost tremendously for difference in applicable code and standard.

For example, Taiwan establish its own code and standard, CNS, over long time mainly follow American ASTM, ASSHTO alike. Sometimes people understand JIS, DIN or BS, but when it comes for competition they will have handicap and sometimes large companies with many engineers may be able to send hordes of people to meet specified contractual requirement, but not always it could overcome the difference.

(4) Difference in executing safety and environmental protection rules

Safety, hygiene, health and environmental protection are vital for construction and engineering works since the stage project planning, work completion, commissioning and operation. But the rules, either its stipulation or implementation differ from place to place.

It’s not only a matter for cost or competition, sometimes the regulations are too stringent, and it’s a tendency in developing economies that the officers or legislators copy the “best” clauses from the developed countries, and aren’t implementable, if we call it idealism. Usually, the foreign companies won’t stand good chance to find a solution satisfactory to the parties concerned, and it means he has to decide to pursue the project or not before the tender.

It seems like that the difference in executing safety and environmental protection requirement is not so significant, but its implication in execution is enormous and only the locals will tell as a faithful partner.    

(5) Difference in Tax codes interpretation and application

The cost of taxation as it appears in terms of corporation and personal income, stamp, excise, property and withholdings tax may not be different to everybody undertaking the contracts, but knowledgeable people know how to save tax starting from the lowest tier of vendor/subcontractors, not to mentioning evading tax.

Tax codes interpretation and application need to take good accountants; however, the foreigners will never expect advantage for all their understanding and maneuver, Again, they’ve to rely upon their local partner, agent or employees; and absolutely a handicap compare to local competitors.

(6) Difference in labor management

It’s difficult for a foreign company to hire labor directly for whatever the project need. Normally, he would try to sub-let all the works to local subcontractors with a view that he won’t be further bothered by how to pay the labor at guaranteed efficiency.

Actually, the good local partner that a foreign company can expect is working as if he were a “comprador”. On the surface he has to take responsibility to take care the labors and at the same time to promise that their work will be done within budget.

The sub-contractors need to pay overtime, absorb idling hours and days, and naturalizing the unions if any of them exist and active, all of these can’t be tackled by the outsider. So, under the circumstance, they have to take the works for rates more than enough, and get compensated if something goes wrong including their own false estimation. 

And theoretically, the foreign company come to a country can choose and sub-let the works to whoever he thinks appropriate, but the management and efficiency problems are always there that he can never transfer them to local partner or subcontractors unless they’re knowledgeable and sizable enough to manage the labor problem.

 Part 7-2: Working Overseas, Advanced Civil Engineering, (NTUST, 5908701)
台科大高等土木施工學教材(2021) 

MT KAO (Blog: http://mtkaoforum31.blogspot.tw/)
(mtkaoforum31@gmail.com)  

3). Chances for Taiwanese Construction Industry to go for Overseas Market

(1) There’re two possibilities that either Taiwanese contractors come to oversea countries working as pure constructors with supposed superior construction technology and engineering ability to the natives; or to take the total scope of project development providing loans, complete planning and design, carry out construction, undertake operation and until transfer back the works to the owner.

In the first option, Taiwanese contractors go for overseas only win and make money when they’re proven competitive and efficient, that they’ve to show overall edges over local contractors who grow stronger day by day. And as described above, the overhead or added value enjoyed by pure construction works are limited and market become tighter and the rising local constructors are able to take almost every contract.

It won’t help whether or not the owner of the projects are governmental or private for Taiwanese contractors. As civil work is concerned, no places in southeast Asia will think Taiwanese contractors’ service is indispensable.

But if Taiwan can provide loans in connection with the construction contracts, the contractors will be welcome in many places where provision of loans will ease the financing strain to confine the development. The competitors in the project involving investment or loans will be European, Japanese or those from NIC countries. Taiwanese companies will have greater chances to get the works and the contractors may work for project management or real construction. However, the loaning agreements usually are between governments, so called “G to G”, to guarantee the return of the loan. The chances aren’t there now.

Should loans not be available, Taiwanese contractors or engineering firms will have to work as the subcontractors of the international developers and main contractors. And they need to prove they will be able to save money, keep quality and speed up the progress for developers or main contractors. And it means they have to contend with other NIC contractors or even the ones of third world origin.

(2) A foreign company can never be as efficient as the natives to organize local labor force or purchase cheap material. Working capital is also something that the contractors from developing economics no more feel they are short of. So, only projects with elements Taiwanese contractors will have advantages over the native companies, they will have chances to get the works. Say, better construction technology and work experience.  
However, Taiwanese sub-contracting system is a problem that the resources, especially those to support market development, are thinly divided among many sub-contractors. The Market is highly fragmented so that the main-contractors, even those with high revenue on the report, staff very limited number of engineers. This is another difficulty for Taiwanese contractor to pursue the overseas contracts in tendering and execution stages because you can’t send people from small company abroad without affecting their homeland activities.

(3) So, it seems like that only consulting companies can go to take limited amount of overseas engineering contract as much of planning and design works can be done remotely in Taiwan.

Of course, the engineering works done must conform with standards and norms such as BS, DIN, or JIS wanted by main contractors and not CNS or American codes usually followed in Taiwan.

Supervision will be another challenge because the owner or international main contractor wouldn't pay as much of Taiwanese expatriate will cost. So, majority of them require a competent local partner to second.

The purpose to work in overseas countries shall be reviewed. Will the business expanded to cover foreign countries be allowed to fetch overheads, profits or service charges as required? Or will it increase the sales of home country made product, software, construction plants or permanent equipment?

 

4). Adjustment needed for Company getting Overseas Contracts 

(1) Consideration shall be given to the overseas allowance, vocation, compensation for tax incurred in foreign country, care of spouse and education of children for the expatriates sent to foreign land in addition to their regular salary and bonus in home country.

(2) People sent to foreign land will face challenges and can very likely be working in desolated situation; and only elite of each discipline shall be assigned to solve the quandaries.

Contrary to the above, two problems always appear in a company undertaking overseas works: 1. sectionalism exists in the concerned departments, chiefs tend to send less qualified people;  2. After distinguished performance in overseas projects, many expatriates coming back home only to find out "good" positions having been occupied by people of inferred capability.

There must be a fair policy and under it a mature personnel management system covering domestic and overseas projects. The chief of department must be a stakeholder for success or failure of the projects the company undertaken.

(3) The percentage of overseas sale amount may be just a few related to total company revenue, but efforts to spent for supporting operation in different countries, such as accounting, taxation, currency exchange, law and rules abiding, local standards and codes, contractual administration, procurement, and financing arrangement can be unproportionally heavy in headquarter. 

The unfamiliarity and the relative massive cost to prop remote operation always hesitate the responsible managers of the supporting departments to throw in reasonable cost to administer the issues, until it become big problem. Thus, furthering the companies’ reluctance to take more overseas works.

(4) The company pursuing overseas works shall offer money, know-how, credited work experience and ready to deploy talented people for whatever the projects undertaken at any time. However, it takes time to obtain a contract, the company shall be big enough to dedicate for what they will have in hands given the short mobilization time. 

Ironically, big company and their follow managers only to think of overseas business at times when they feel jobs in hands aren't enough. But the contracting business will not come only to fit your schedule, again, only those with plenty resources can afford to do overseas work.

5). Assignment of People for Overseas Works.

(1) The assignment of branch or project managers of overseas works are critical. They’ve to be adaptable and adeptly in strange country: keen and quick to accept different culture; eager to defend own company’s interest and shun from any private agenda. 

The appointment has to be prudent because they’re one of the very few can be sent from mother company to lead in the places where the projects located because of the high salary difference compared with the locals.

In general, personality of a representative is more important than his education; cultural adaptability than language, and impulsive energy than professional experience.  

(2) It takes time to get the good contracts in overseas work, however, the company management is not patient to wait for the business success and is likely to push for immediate money count. For overseas work, meaningful scrutiny can only be made by people closer to the place where clients and projects are located, i.e., the representatives or the agent in the area. Under enormous pressure they may be forced to undertake projects not worth for risk and resource spent.

For the same consideration that the people in headquarter shall not be hasten to recall representative(s) from foreign branches or to change the local agent unless they’ve made mistakes hurting interest of the company. 

6).  Necessary Mentality Changes for Overseas Business Decision Makers

(1) The company management shall be knowledgeable for overseas business; and is willing and passionate to develop prospect in foreign lands. If the decision makers himself have overseas experiences themselves, it’s a plus.

For Taiwanese companies enjoy vigorous domestic business at the moment, they must understand prosperity brought by market protection is temporary, that only the industry strong in essence and endurable for foreign competition the companies’ future can be guaranteed.

In view of the problems that always happen in a small construction market, the management and employees of Taiwanese companies all alike shall realize the need to go out for challenge, is a hard but useful way to embrace the bigger market, not least to get baptized for advanced technology through early contact with the international competitors. 

Consequently, all of them shall be willing to strengthen expertise, learn international practice and adjust attitude and approaches. 

Before going for specific project, the Company must make sure it will have people experienced enough to go for assignment; or it have fair chances to recruit qualified people. 

(2) For operation in strange country, the company management shall open their  mentality. The worst sentiment that an expatriate or those sitting in faraway mansions may develop is the feeling of superiority toward the locals; they judged the people wrongly for talent and loyalty and have to pay the price for wrong decisions all the way to losing money and reputation.

Actually, an idealistic team shall consist of local agent (sponsors, partners), staff and expatriates; working intimately to overcome the difficulties waiting for foreign companies.

A capable and trustworthy agent or sponsor will obtain in time information, establish links with authority, and acquire competitive local resource for the company. Above all, they wouldn't get wrong contracts for the company for meager commissions to continue the agent ship.

In almost all the countries, the implementation of the projects, engineering or construction, require minimum participation of the local partner(s); a good one will offer the assistance to reduce the cost, solve problems related to license and official permits. Some of the reliable local partner will be eager and able to share the financial overburden resulted from the unbalanced payment schedule.

The employment of locals, especially, in the branch office for business pursuance and project supporting is vital. Their salary and chances of promotion must be assured; and the opportunities to learn the advancing technologies must not be reserved. Overall, the employment shall be made in a way more prospective than their engineering contemporaries working for native companies to ensure loyalty and reliability.

As people from Taiwan in strict sense will only work as passerby ultimately. Trust and confidence must be established with the locals as they're there forever. Even slight discrimination will be incubated and turn out to become source of disloyalty and misconducted behavior in the future.

 Part 7-1: Working Overseas, Advanced Civil Engineering, (NTUST, 5908701)
台科大高等土木施工學教材(2021)

MT KAO (Blog: http://mtkaoforum31.blogspot.tw/) 
(mtkaoforum31@gmail.com)  

1) Evolution of International Construction Projects:

(1) Stag 1: Free Movement of Construction Resources across the Borders

Lack or insufficiency of construction resources in terms of material, working capital, and technologies prompted the host countries to accept foreign construction companies to come to their turf when they build economies from scratch. It’s time when machine were expensive, native workers only available in number, local engineers yet to be trained, even the surrounding infrastructure to support the construction activities of the referred project were poor.

The recipient countries needed to implement the projects but they were also obliged to nurture their own construction forces for long term purpose. Therefore, they called for international tenders requiring more experienced and resourceful foreign contractors to be the main signing party, and demanded the local ones playing the supporting role.

Though the contractors from developed economies might complain the restraint sometimes made by the local partner as unnecessary; in general, as a stranger, they really need good guides helping them to recruit native workers, obtain regional material, and solving all kind of problems in a culture that they feel weird and helpless every so often.  

The local partners would act as sleeping partners or agents at the start when their ability to handle construction works was limited. But as time went by, they would grow in size and strength to advance their scope of undertaking. Their ascending, in certain extent parallel with the speed up economy development of the host countries, was inevitable that the international construction firms should have accepted and adjusted for their approaches. 

In view of the changing market in favor of the nurtured local construction firms, the governments used to welcome the international contractors would begin to amend the relevant laws so originally permitted free flow of machine, man and resources would be regulated. Always the new discretion would ask the foreigners only to carry out minor part of the business which the locals still need assistance; or sell expertise through “Technical Collaboration” arrangement by provision of plan, drawing and instructors. No more hefty revenues for the ones from overseas. 

After all, the governments holding the budget and opportunity to build the project should have final say to decide who he wanted to deal with. And for civil engineering, it had never been too difficult for people started with amateurism; therefore, the authority’s choice for the locals would be apparent because they could build things cheaply after brief learning process, and know how to navigate through local bureaucracies that foreigners would’ve never known.  

(2) Stage 2: Work Hard vs Work Smart! 

Thanks to the rising human cost and vanished technology edges, construction and engineering firms from developed economies had to withdraw from conventional third world market, only to see the fledging contractors of newly industrialized country (NIC) eager to fill the vacancy. The new comers took lessons learnt at home for past decades: trained professionals, learnt advanced technologies, and pay much attention for tangible construction, such as harnessing machines and plants once considered only the monopoly of the westerners for exceptional efficiency and exactness. 

So, the construction companies of newly industrialized country (NIC) wanted to go to overseas countries for projects that only yesterday the Westerners would come to their turf yelling yes and no for their technical and management supremacies. And now they had no problems to excel themselves as quick developed home market had offered many venues for practice.

Yes, it’s almost a definite conclusion that the construction companies from NIC would always out beat the westerners in international competition as price and schedule were concerned. But the outcome was disappointed as their accrued competence for overseas ventures didn’t even guarantee return of the costs let alone the profit. 

The reason is that the international contracts now are no more centered on pure construction. And in the name to make the investment more secure, a construction contract now require participation of those non engineers: notaries, law firms, inspectors, laboratories, certifiers, appraisers, unions, arbitrators etc. The absolute figure of fees paid to them is not significant within total contract price but still enjoyable sum compared to the meager overhead allowed for the hard-working general contractor, most of them now from NIC. 

The rules of the game have changed. We also understand the contract and its practice mainly are stemmed from custom and history; conditions and specification are drawn by contract experts from developed economies, language and proceeding offspring of the same culture. When westerners quit the substantial construction, they create added values continually to complicate the works in the form of "norm", "standard", and "proof", which the Asians may have difficulty to comprehend.  

It’s not to say that the values generated by technology, craftsmanship and labors for construction projects become less important. But it’s conceivable that working hard as the only way to thwart competitors from the developed economies isn't practical. The industry evolved, not everything can be repeating. 

(3) Stage 3: Investment Security Trump Everything and in Favor of the Establishment

The trend for construction works in 21st century is many of the gigantic projects will be invested by private entities as schemes like BOT or BT continuously churned out from governments with drained out coffer. Money is everywhere but the mammon doesn’t like to face uncertainty; so the professionals now including commercial experts are flattered to present risk free schemes to woo investors. The security of capital and return of vowed profit will be priority to trump anything else. As a result, the concerned parties have to pay attention in project phases starting from planning, design, construction, O & M, and until even marketing of the product.

Construction cost is important judged from the big number it used to be, but its share in total price become lower as non-engineering cost rises in weight. Then, the guarantees for work completion is everything, the evolution continues, that the real constructor may not be the one awarded the contracts because the records to complete the similar projects, capability to accelerate the delaying works, or financial power to indemnify the relevant parties will be more critical.

Public or private clients, when they want to initiate or kick start a valuable project, justification as to determine who shall be main partner is important because when something happens there must be questions drawn by stakeholders, only then the decision maker will find awarding to a reputable company is a safety play.

Nowadays there won’t be many conventional “build according drawing” construction contracts among international tenders, the contractors from advanced economies adapt very quickly that they go beyond traditionally a pure construction company will have to do so as to respond to the client’s diversified demand. On the other hand, many contractors from NIC consider technology and work efficiency most essential part of competition have met difficulties for overseas projects. 

So, no wonder that the main contractors undertaking great overseas project today don’t need to own any construction resource themselves, they can have many choices to sub-let part or whole construction works to single or dual constructors who maybe local, or a self-regarded higher tier contractor from overseas countries. He may exercise control and deliver the work effectively similar to what Nike or Adidas have done over jerseys and shoes. 

Under the so-called globalization market system, free flow of man, money, machine, and material is encouraged; and it seems fair. But the problem is now the companies in less developed economies will provide labor and skill for substantial part of the works but share limited added values compared with those set up the standard, specification, giving checks and certificates, maintain the margin and profit, but seldom bear the risk.

The 20th century capitalists in construction industry established powerful machine fleet, fostered engineering capability, put up contractual and legal frame, and monopolized banking system with all their cultural and political advantages indeed commanded the business for long time. But when those escaped from exploitation considered themselves a good learner to be one member of the new class; the 21st century capitalists evolve and thrive, that they now will secure capital and retain return through "possession" and "exchange", exhibited in forms like “added value”, “creation”, and “reputation”, to the frustration of late comers. 

Part 6-3. Features of Construction Industry explained in 5M, Advanced Civil Engineering, (NTUST, 5908701)
台科大高等土木施工學教材(2021)

MT KAO (Blog: http://mtkaoforum31.blogspot.tw/) 

(mtkaoforum31@gmail.com)

 4) Money

(1) Payment: cash, in kinds or goods (barter), deferred (BT), franchise revenue (BOT, PMI).

Men work for money, only after the contractor can get full payment the completion of the project is meaningful to him.

And because the construction contracts normally are with big amount of money, public or private owners will have various form of payment according to their financial conditions. Normally they will be paid in cash, kinds or goods (barter), deferred payment after completion and transfer to the owner (BT), or paid through franchise revenue (BOT, PMI).

It also possible that the form of payment can be mixed between the above mentioned methods. The contractor must evaluate its own ability to accept the form of payment, for example, when he would have accept the payment in crude oil over long period, he has to evaluate the possible oil price fluctuation and the extent and cost that he would have been protected by the futures.

The reliability of the owners, government or private companies must be taken into account.

(2) Standard international contract Forms

How the contractors get paid depends on the contract conditions entered with the Owners. Normally we‘d have type of contracts such as:

FIDIC  (The International Federation of Consulting Engineers) (Red Book 【building and engineering designed by the Employer】, Yellow Book 【M&E, building and engineering works designed by the Contractor】, Orange Book 【 design, build and turnkey works】, Green Book【 the short form of contract】 ,Silver Book【 turnkey contracts. 】, Gold Book for Design, Build and Operate Contracts】, Turquoise Book【 Dredging and Reclamation Works】),  NEC3(New Engineering Contract3, used for civil works in UK., Australia, New Zealand and Hong Kong, the language of it is simpler and the signing parties are said to be more equal), AIA(American Institute of Architects, form of contract popular in USA.), JCT forms of Contract(Joint Contract Tribunal, for architectural works in UK.)…etc..

As projects are different for each other, the contracts need to be modified to fit the situation; they will be reflected in so called Special Application (or Conditions) and leave the General Application (or Conditions) unscratched. Whatever slight difference in Special Application will result in big departure in reality so that the contractor need to read carefully even the author of standard contract or the Owner would have claimed they're the most friendly contract terms.

(3) Money beget Money.

Compared to the old days now that big component of  contractual money pays for intangible part of the project in the name to protect every party involved. The added value including the cost to acquire money, assure the delivery of the works, O&M of the project and even to the extent to guarantee the products or the purposed functioning of the project will be welcome by the customers. Thus, the added values are created.

But it is true that engineers are not playing the dominating roles in construction business because the invention as said is from improvement of technology, business skill, capital fluidity, which, financial, legal and MBA people intrude and colonize relentlessly.

Though money is everywhere (due to QE?), but they get more respected; people like to invent idea to attract the capital, for that they provide guarantees, mitigations and even placebo like assurance to fascinate mammon. Under the new trend, a big part of the construction projects will be controlled by hordes of non-technical people.

For example, the government has plain financial resource for construction project and it will be spent almost exclusively for construction related items last century. And right now, big chunk of them will be paid as financial cost for BOT and/or PMI as people argue private capital shall be required or investment on public works will lag behind. A small but still significant part of money will go to the so called independent third parties for their certificates, report and affidavits at non bargain-able cost (as to be disposed by those non-technical people), while the construction hands need to compete each other.

Engineers must realize, somehow, they would become a secondary role for the construction projects, but on the other hand, they could become a better manager than people of other discipline to control the whole project because they know better than any others. Of course,  if they reject to become more "general" they will lose the chance to be the dominating figure of their project.

5) Market

(1) Contractors with Lemming Mentality

As it's said above, there're 2,800 strong Class "A" contractors in Taiwan to apportion a small market; the threshold to go into the construction market isn't high as capital (relatively low to the contract amount) is concerned. When they get contracts, the contractors will find many sub-tier contractors more than eager to share risks and sometimes loss despite ability is in question.

The running cost for a Class "A" contractor is low in Taiwan, the minimum expense will be fee paid to registered PE, a tiny office, plus a secretary to answer the bell. When the bosses cannot get business, they just need to go for "hibernation", and pay such low cost for some time. They will wake up when they get contracts and then recruit people including manager and engineers, so as to activate the company. As a matter of fact, employees won't be against shoot and off employment styles because most of them like to attach themselves to the area they like, particular big city or home town, making themselves ready when someone get the contract.

So, the contractors of "entrepreneur" type are of the majority. They're competitive and spiral the awarding price, especially of public works down. The market practice is not possible to nurture big contractors with know-hows and experience.

But one day it will come, provoked by market mechanism destined to happen, such as sudden sabotage of dump trucks of 1990 (resulted in soil haulage hike and aggregate short supply), or sharp escalation of steel price in 2006. Many contractors didn't have sufficient provision for contingency gone broke and their number culled significantly before market re-juvenescence made competition rise  again.

The process repeats again and again; the contractors go up and down like riding on the changing tides. One moment, the contractors' number will be swelling like lemmings grow to incredible number in short spring time; the other moment the nature will work, drive some of them jumping from the cliff and the rest follow. The market are still there for another cycle; but the saddest thing is the professionals wouldn't have chance to lead while public has to bear most of the cost that speculators have to pay.

(2) Style of Competition: Lowest Bid, Evaluated Lowest bid, Value for Money.

The problem of construction industry in Taiwan is over competition. Lowest bid is blamed because under the bureaucratic system the budgets were considered to be right and a standard for the contractors. The winning price was considered as true market cost or the one edit them shall be subject to official chastisement. Automatically, people, the budget builders or the tenders will consider it as a bench mark for similar tenders. Vicious cycle will begin and the prices become less flexible waiting for another episode to correct; of course, it's always too late.

Evaluated lowest bid is taken with the hope that the best contractor and their offer can be selected as the best for the project; however, the winners may not be the most outstanding one, and the judges' supposed imparity can be second-guessed. Authority try to improve the criteria for evaluation of the bid only invite more criticism and so the evaluated lowest bid system stopped at 2007. For similar stories, BOT and PMI also suspended except for particular projects; and the tendering system returned to lowest bid for next decade.

It could be true that in recent years the contractors didn't make money and running business only to keep office open. They lose expertise because the poor overhead don't allow them to afford the employment of senior engineers. 

When they've made mistake individually, they suffer; when market changes drastically, everybody suffers too. Therefore several tenders in recent years, they are "aborted" because contractors consider the budget is too low and  schedule tight. So, the evaluated lowest bid is coming back, the authority may get lessons and be more careful to choose the "judges" this time. Hopefully.it will last long. 

The final goal for government spending shall be "Value for Money", in which, the project completed will worth money spent, it's subjective as modern construction will involve different requirement by different sectors, thus giving different evaluation. But it's starting, we wish the bad element in the market will be eliminated and professionalism will have chances to prevail.

(3) Elements of Competition.

A market considered normal will be the one that the consumer is most important. For public works the government is single biggest buyer, he can draw the lines to select the contractors based on their performance, past experience and readiness for the current tender.

It means the government can define a clear and objective criterion for elements such as price, technical approaches, time of completion, safety record, experience in similar works, existing work loading, managerial and technical resource in hands, records of contract disputes (with owners) …etc...

For international construction tenders, the owners usually will analyze and evaluate the tenders according to the criteria established objectively. The scores and the tabulation can then be submitted to higher ranking people, maybe figures with reputation, for review. The process will eliminate the subjective judgement to minimum to prevent the outside criticism and interference. 

It's true that during the selection of the contractors, the authority and invited judges will "play god" to bring up the winners, and the result maybe that the selected aren’t the perfect ones because many factors are involved during the selection and later execution. In Taiwan, people may not be patient and policy makers are susceptible to criticism, however, the rules shall be respected at least for some time. There will be some time for confidence building, even if people are not fraternally to each other.

(4) Defying the International Norms.

For long past and even for now, the developed countries especially Europeans and Americans have big say on the codes, standards, disputes solutions and financial arrangement of the international projects. They are establishment enjoy privileges and power more than their competency.

The Asian powers are late comers in the field and also they are to follow specifications and conditions established by the advanced economies. As a result not to have sufficient chances or clout to interpret the contract, they suffers considerable losses in international construction market despite they have good engineering knowledge and construction dexterity. 

We believe it's not an intended design based on the race and culture but is an essential market problem after long time practice, and realize to change it immediately will be difficult if not impossible. 

There could be solutions, one is forceful and intransigent, complete "westernization" like what South Korean have gone under through; that they're indisputably good in high rise building and complicated plant built-up. The other is to change the game rules as Chinese have approached in their Belt and Road Initiatives, success or failure, remain to be seen. 

People have to recognize that many of our practice in construction business, which shall be very local, actually involve many western norms; you modify them, or they change you. Again, to be patient.

 Will "Civil Engineering as a Vocation" be honored in Taiwan。土木工程作為一種志業在台灣可行嗎？

2021年4月29日於台大土木系220教室，結構組碩博士班同學研討會演說 

MT. Kao, CEO, Sinotech Incorporation(Former Section Chief Overseas Department, RSEA; President Pan Asia Corporation; Chairman, RESI Consultant)

1. Pre-words

Young men drift to the world always have feelings of curiosity, strangeness, and nervousness after graduation. Engineering graduates feel better because they’re considered to be more promising in term of income and status compared with other social groups. 

But it is true that the wealth generated by investment, ventures and rent collecting has been more prominent and professionals are not sitting on the upper rungs of social ladder as comfortable as before. 

This lecture tries to impart knowledge based on the facts taking place everywhere, and quest whether or not the vocation Civil Engineers would worth to start with as the general public may not respect the profession for which the students may devote their entire life. It’s the lecturer’s wish that young men will know how to adapt in a changing economic system.

序言： 工程學科畢業者於就業機會、待遇與社會地位，一向被視為較其他學科為佳；但近年演變，投資、投機，特權尋租所得，竟較專業為優。故以下講詞將探討在台灣以土木工程作為志業而付出，是否值得？

2. Proficiency, Income, and Social Status of Engineer in 21st Century

1) Difference between Income through Investment, Speculation and Bequests, and that from Personal Capability and Efforts, since beginning of the Industrial Revolution.

1) Difference between Income through Personal Capability and Efforts, and that from Investment, Speculation and Bequests since beginning of the Industrial Revolution.

-  The said ratio kept constant since beginning of the industrial revolution for 100 years until World War I and a downward trend started cutting it by half until it surged again in 1980. Now it goes back to the same level as 1790. 

-  After World War I the professionals continued to increase their income and wealth by their own merit, people started to herald it as the beginning of a new era of more inclusive capitalism and trust the trend would not revert. But what happened between 1980 and now proving that it was just a transitory deviation. 

人們自從投資、投機，繼承得到的收入，與個人能力與付出的所得的比值，在產業革命到第一次大戰，約100年時間幾乎為常數，但以後變小，到1980年成為一半，讓人以為資本主義趨向改良、共享，但以後卻又變大，回復至1790年數字。

2) Factors affect Income Distribution and Talent allocation:

- Continuous Technology Improvement

Technology is a major driver of productivity and economic growth. The top riches no more need so many people to attend them and mid income people can enjoy comfortable life. 

However, the saying (by Voltaire) “the comfort of the rich depends upon an abundant supply of the poor” still remain true. Inequality exists and people are exasperated because they consider Technology Improvement is s the culprit.

- Super Managers and their Rise in Modern Commercial World

The new era favors more skilled over less skilled; it increases the return to capital owners over labor; it enables or turbo-charge globalization, reducing employment and constraining wage-able services; it increases the income advantages of superstars and the super-lucky; it generates rents in highly imperfect markets. Among them, the super managers with winner take all mentality popular in US deserve our attention.

- Can “Meritocratic Extremism” be achieved to save Professionalism?     

The income generated by digital capital shared with certain kinds of complementary human capital, including innovators, entrepreneurs, and top executives. They’re few but pride their success for having unique merit and education. It’s dangerous because many people in society accept the so called “meritocratic extremism”; actually, it’s a super roulette that professionalism and intellect fell back before it.

- Digitalization and AI

But now that significant share of the income shaped by skill-biased and capital augmenting technical; the professionals of conventional definition may not be in a steering position, that software, tradable programs and even AI will do much of the engineers’ job diminishing their clout in retaining work opportunities and sharing income. So, would fear of people like Luddites justifiable because the skills of their craft would go dumb or the smart machine and AI would replace them in this Second Machine Age?

Is basic universal income a solution?

科技精進改善人們的生活，但仍有多人陷於貧窮，需為生存奮鬥。新時代對資本所得者較靠勞動收入者有利，全球化及新奇財務運作更有利於財務靠資本與運氣增加。有巨額收入的超級經理人崛起更是時代的特殊現象。幸運者認為高收入是自己才能所致，更服膺贏者全拿的「極端才能主義」。專業如有堧體、程式或AI來代替，工程師技能、修為變得無用，工作、收入在此「第二次機器時代」無法得到保障。在此情況，「全民基本收入」事解決方案？

3) Cultivation and Preservation of Professionalism 

- Devotion and Passion paid to nurture Intelligent Students during Academic Education.

Young professionals must try to learn from the beginning that at the democracy or open society, the elite, instead of accumulation of people, must settle and conclude for government policies, economic agenda and public works. And engineers are part of them and not those to be informed and ruled, in the process contributing intelligence.

However, engineers having to be people of integrity need to know social norms, market rules, and not the least, regulations and laws. And it’s long and difficult process, that they shall be honored and paid with reasonable material reward; not apparent in today’s Taiwan.

- Pursuance of Career and Profit at the Expense of Clarity and Conviction that must be associate with Engineer.

The “information technology’ demanding more return than from human capitals previously formed by employed engineers; corporate governance practices and social norms will change allowing more rent-seeking behavior because there will be less humanity control by smart machine and AI. 

Will the alienation caused by machine detecting and responding to the environment and occupational to access massive data replace human brain clarity and engineers’ dutiful and faithful behavior?

- Code of Engineering Ethic in terms of Faith, Integrity, Law abiding

Engineering ethic request the engineers to take responsibility toward society, environment and the colleagues. Will it be the same easy to and simple for professionals to follow code of engineering ethic when their sharing in total company income much less than before?

- Will MBA graduates, Lawyers, Financing Expert be regarded as Intruders to the Professional or they’re just Supporting? 

The modern construction industry essentially is governed with human distrust: terms of contracts, laws, certificates, checks, guarantees, tests, investigations and reports, are used to stimulate the antagonism between, and also to protect, parties with confronting interests.

專業培養在學院時即需開始，漫漫長程，掌聲稀疏，要靠奉獻與熱情維持。自動化與AI雖能取代部分工程師專業工作，但對工程倫理實踐可能造成問題。現代工程產業及相關契約為保障資本，管理、財務與律師等介入，攫取大多附加價值，工程師之尊嚴、重要性與收入降低，如何匡復，值得深思？

3. Civil Engineering as a Vocation in Taiwan

1) Power to Decide Fate of Public Works in Descending Orders

-  Citizens with Liberal and Egalitarian nature but much less Fraternity

-  Media, Councilor, Elected Officials, Civil Servant and Law-enforcers

-  Self-regarded Professionals

-  Engineers 

2)  Pay and Responsibility/Liability

3)  Major Players in Construction Industry 

- Frontage Players: Contractors, Consultants, Architects, Specialty Companies,   Work Gangs 

- Supporting Entities: Banks, Insurance Company, O & M Contractors

-  Third Party Participants: Notaries, Lawyers, Inspectors, Laboratories, Certifiers, Appraiser, Unions, Arbitrators.

 4)  Origin and Background attached to History, Culture and Politic        

     - Discrepancies found in between regarding construction performed by “Low Context Culture” Professionals or” High Context” Occupational?

-  Remnant of Peasantry Economy: People Regard only Tangible Construction is valuable and worth to pay.   

-  Over-competition is encouraged by Public, Media, Politicians, down to Civil Servant, and People believe it will bring Price Cut.

- Civil Servants aren’t Allowed to Correct Errors at Early Stage, Misinformed Politicians Aggravate the Mistakes, and General Public demand nothing other than Consequence

- Pay are too low for Engineers and Academics, nobody bothered to give Independent Voices; the Vicious Cycle Prevent any Possibility of it.

4. Will Professional Career Worth to Start with?

1) To Overcome the Facts: 

- The Engineer’s Career Path will be associated with Loneliness and Criticism, rarely will it receive Loud Applaud along the way.

- Public Work Construction is part of the Charity; more than One-sided Contract Terms and Condition, the Dealing must Serve the Public Interest First

- Non-Engineers are everywhere in the Industry, eager for Speculation and Compel other Parties to Share the Risks together. Decimation of them to play the Frontage Role is not possible as Tradition Cynically won’t break anyone’s Rice Bowl.

- Professionals need to learn “Knowledge” through Education and Training; “Skill” to Apply Correctly the Concept and Information obtained; and to exercise “judgement” based on Experience, Analysis and Computation for Project Assignment. But what will happen when Software and Cold Calculation will do everything, and Engineering Firms become Factory?

- Sad to say Passion and Inspiration wouldn’t be a Part of Engineering

2) Engineering will be subject to Unprecedented Changes

- Relevant small Taiwanese Construction Market Size Starts to Push its Integration with Neighboring Country in an Invisible way as Projects become more Sophisticated and Sizable. Companies have to Share the Resource and Expertise with Foreigners having Experience in bigger Market. That is the Opposite way Successive Governments Encourage Construction Industry to go abroad.

- Short Supply of Labors and Tightening Restraint on Work Sites Oblige Engineers to Swerve Solutions from Current Practice

- Investment will be honored if not Guaranteed. Added value in Engineering Contract, will be Created by other Professionals such as Lawyers and Financing People.

- Real Professional will be Reduced in Number as Automation and Digitalization Dominate the Industry, need not the same number of Engineers to do Planning and Design Works. 

3) Beliefs and Altitude

- With Time and Patience, Engineers in Taiwan can Claim back its Authority in Project Execution. Past Decades We witnessed the Changes in the Construction Industry in favor of Engineers, though slowly.

- Income of Engineers in Taiwan Remains Low and also their Social Status. People have to fight hardly for them though there is Tendency that the Technology, Financial and Business Evolution will reduce relevant Share of Payment to Engineers Globally.   

- Whether or not the Construction Market will be more Concentrated or Fragmented is not sure, but it’s important that Engineers shall not only care about Technical Matters, and need to Learn more about Coordination and Communication in and out of their Organization.

- The Understanding that Passion and Work must be linked together applies for both Engineering and Art, which many Young talent are Crazy run after now. But Engineers know they have to Quest Incessantly for “Progress” in the course of Engineering because every Achievement Praised for now will be overtaken not so long after. That’s a Sense of Superiority that this Dull and Low Reward Profession Can Offer. 

Part 6-2. Features of Construction Industry explained in 5M, Advanced Civil Engineering, (NTUST, 5908701)

台科大高等土木施工學教材(2021)

MT KAO (Blog: http://mtkaoforum31.blogspot.tw/) (mtkaoforum31@gmail.com)

2) Machine

(1) Prototype, bespoke; portable, fixed.

a. Machine, prototype

People in construction industry need to know machine, plant and equipment for their manipulation, size, cost, productivity and supplies required. 

The general contractors used to own machines, in the days they're expensive relative to human cost.

When a country start to build infrastructures, they need to move earth, lift heavy weight, paving concrete and asphalt, and confront water or inaccessible. There're machines typical to do these jobs and we call them the prototypes: bulldozers, cranes, graders, trucks, mixing plants, paving machines, compactors, working boats etc. 

The works are many in fledging economies, so the machines are welcome for repeating usages in seemingly endless construction. They’re powerful to replace manpower and quick to deliver the landmark projects. So when machines with international brands such as Caterpillar and Komatzu appear at construction sites, they symbolize the government’s commitment to the economic growth.

b. Machine, bespoke

As countries proceed to build infrastructures projects of more sophisticated nature, the machines and the method employed may need special design and fabrication, we called the order and the makes bespoken. The usages are limited unless market is big and construction is in succeeding, but it will finish the works for that human won’t be accessible or to do. The most obvious one is tunnel boring machine of different diameters and shapes at restrained spaces. 

c. Machine, fixed type, mobilization and assembling cost

Most of machines can be transported to construction sites, either by self-driving or mounting on trailer for long distance, we call them portable, such as dump trucks, excavators, dozers, loaders, etc. For mixing plants, TBM, tower crane, or machines too big for transportation, they're divided in parts or compartments, and then hauled to the site for erection; we call them fixed type of machine.

Engineers must take into consideration the cost and time required to mobilize, install and demobilize construction machine. Sometimes in the remote area or hazardous places disembarkation and the installation of plants and equipment can be difficult and costly that the engineers have to think about the solution. The damages possibly incurred to the parts or entire plants during transportation shall be foreseen and at least insured against accidents. 

Also people need to know the value of certain fixed plants decimated very much in single usage, and the remaining value after one project could be only the material cost after dissection.

(2) Operation, maintenance and repair.

a. Owning Cost: Depreciation, Interest, Productivity

In the days when the value of machine and spare parts far exceeded cost of people serving them: operators and crew for maintenance and repair, only companies big enough would buy machines as main asset and source of revenue. For two historical reasons the machine ownership had to be overtaken by specialty companies: 1. Facing rising human cost and fastidious labor and safety laws, only companies able to concentrate effort to manage problems related to operation, maintenance and repair are in a position to handle the machines. 2. Company owning big fleet of machine wouldn’t have chances to share costs with other companies through rental arrangement. 

The machine owning cost shall be calculated as buying price plus interest payment over the machine's service life. One is called flat depreciation method, use the buying price divided by estimated remaining service life; the other is weighted depreciation method, assuming the first 2 or 3 years the machine will have high productivity and place the cost depreciated certain fraction more in such 2 or 3 years. 

However, the taxation offices legally also have power to decide amount permitted for depreciation for different equipment. It affects how the owners should have decided on to charge their equipment.

Interest payment can be considered for each company outside of the machine cost calculation.

b. Maintenance and Repair Cost

Machines need operators to move them, the owners must pay to the operators the hourly wage and overtime. And machines also needs daily, or periodical maintenance; the related cost are the wages of the workers responsible for maintenance and amounts covering for consumable, lubricant and tool. Repair cost in general is low when machine is new, but it will be accelerated when machine's condition become less fair in later part of work life. The elements of repair cost consist of mainly two parts; one is labor, and the other will be that of spare parts. In developed economy, the repair cost shall be between 100% and 200% of the initial cost according to statistic, depending on different equipment. 

In developing countries where machine price is high compared to human cost, the wage of operator can be 4-5 times of that of manual labor and output of machines will be higher than what can be achieved in advanced economy. Because when machine is expensive, the owners don’t care to give higher payment to operators, which can be easily covered by revenues from higher machine productivity.

(3) Rental and owning.

Started from 70's last century, general contractors ceased to own construction machine themselves in consideration of big investment over uncertain business opportunity, difficulties to handle labor relationship with operators, maintenance and repair workers, and judgement based on specialty knowledge over replacement or repair of major parts.

The bosses of equipment rental companies always start to acquire construction machines with blessing from big construction companies guarantee the continuity of the works. It's important in Asian countries that this kind of company were operator com maintenance workers, being able to keep equipment and trucks in good conditions with their entrepreneurship. 

Furthermore, they may work with their supra contractor on quantity and rate. The arrangement is costly efficient but not assured schedule wise especially massive amount of mechanic works to proceed. 

It is proven that the general contractors have no way to replace the small owner for construction machine maneuver involving operation/ maintenance/repair. Nowadays the rental rates can be as high as that 2 years charges may be equal to the buying price of a plant. 

(4) Construction method and machine selected.

a. Selection of Work Method and Construction Machines.

Designing an efficient construction method is key to successful deliver of infrastructure works: right construction sequence, get through most critical part of work, minimize undue outside interference, and avoid hazardous incident from happening shall be considered when the plan is drawn. Engineers may have wide range to select machines for construction method; however, it will be influenced by the market availability for machine itself and operators, for example, in Taiwan excavators are everywhere but dozers and loaders not frequently to see contrary to North America. The reasons could be incidental that maybe the ones first introduce them to Taiwan prefer them and others just followed, or the operators are dexterous to maneuver the machines in congest excavation site in Taiwan.

Market size and available replacement could play a part, the use of tower crane was another example, because the maintenance and mobilization cost shared by small number become significant and mobile crane can be substitute, so the tower cranes are not so many in the island. 

In Taiwan, selection of machine once accepted by the officials, budgeting and supervision for that particular item will be almost fixed in public works. Changes to another machine or method will have to be accommodated to the bureaucracy; adding another point that people and work gangs aren’t so innovative to create new construction plans. Another proof that civil contracts is local and conventional. 

b. Machine and Manual Labor

In countries like India, machines face strong competition from man power; Bulldozers and earth moving machine are levied with high import duty and surcharges, that men and their assistant with hoes and dustpan will have chances to outperform construction method based mainly on mechanization as cost is concerned.

When owning a machine become expensive, the efficiency will decide its survivability. 

So, in the case of India construction market, the wages pays to the machine operators won’t be significant compare to the revenue generated by extra output brought by the operator’s better performance. Thus the wages of operators can be 5 times of the common labors in developing economies.

c. Cost factors in Prototype and Bespoken Machines

There is situation that prototype machines will not meet construction requirement, the bespoken one will be the solution. 

But engineers need to know: 1. Lead time to design and build the plant is long; they’re not available at once like ordinary plants on the market. 2. When one part goes down, entire system will idle or fail. 3. Though people will try to re-use it for next project but the chance is slim. 4. The whole value of the bespoken plant can be high and when it scraps after one project, the depreciation allowed can hardly be claimed. 5. Turnkey contracts become popular these days; the contractors will have chances to design structure sections optimal and fit into owned bespoken equipment.

3) Material

(1) Local and Conventional Material shall be chosen for Construction.

a. Transportation Cost and Locally Available Material 

Material for construction is bulky and transportation cost is high, so they have to be obtained from local for maximum extent as quality and property may not differ so much from the outside world.

Attention shall be drawn to the fact that sometimes the overwhelmed material requirement of a gigantic project may tilt the supply/demand balance drastically in an isolated area. Investment in term of time and money shall be considered before projects start to assure a quality and punctual completion.  

However, material prices can be fluctuated from time to time either in the case of limited supply, such as aggregate and sand, or as a result of global boom like steel and rebar. It can be deadly to an ignorant contractors, that the risk can only be addressed through contracts with so called escalation clause giving minimum protection for the builders.  

Because the projects are there for economic development so that the employment of local artisans and labors shall be considered as early as in the design stage.  Engineers must think about the possibility to use traditional technique involving local people and product even to the point to edit the specification to show respect to the tradition. For example, the Baku piles were used in Southeast Asia for soil retaining and promote compaction effect in embankment, it has been used in international class projects for its convenience to install.

b. Continuous Evolution for Material used in Construction

In old days, human's weight lifting capacity was limited,  long distance hauling capability also prohibitively expensive and could only go through waterway. People had to use small and light material from local, like timer, brick and mortars for buildings and structures in most of the cases. Granite and basalt were used in part of Europe especially for churches, castles or monumental structures. 

Wooden structure was erected in Asia for aristocrats and land lord, but the timber size reduced as a result of deforestation. In general the masses had to live in hut and dens for which they built with any material they could pick up from nearby area. 

Discovery and use of steel in civil engineering works change the world. They replace traditional construction material resulting in great cost and time saving. Steel in the form of rebar, sections and strains give buildings and structure new dimensions and spatial aesthetics. People still think of innovation for construction material better than steel, such as fiber glass or high strength concrete, commercially one day it would be popular as steel used today.

Mankind are smart to utilize everything from nature but sometimes it can be tragic. For instance, there’re countries like Bangladesh where hard stones and sand difficult to obtain. So the local people extract and burn clay from alluvium into brick like material. Then women and children will use hammers to break them into sizes of and utilize them as aggregates and sand. Then they mix them with cement to obtain concrete. The solution risks human life because buildings and bridges sometimes collapse for the weak strength those improvised materials provided. It's wrong type of localization; poverty force people to continue the practice.

c. Green Consideration

Nowadays, carbon reduction is an issue, the material used in the projects shall be considered climate friendly, and engineers need green knowledge to incorporate construction material made from renewable, waste or need less processing.

Commercial calculation won’t be the only consideration.

(2) Material and Equipment to be incorporated into Permanent Project.

a. Project More Sophisticated

As economy advances in a country, the construction work won't be simple structural work again; many systems and equipment will be installed in addition to steel and concrete. So, procurement will be more complicated than dealing with composition, dimension and strength of material. At the time of procurement or before that, tender, delivery of well functioned system, operation and maintenance, shall be arranged with assistance of reliable makers or specialty contractors. 

An experienced general contractor will know there will be risk hard to control during the course of make, transportation, installation, inspection, monitor, test run and commissioning of the complicated equipment and systems in modern construction contracts. So, the contractor has to be in cooperation with firms working in different field and the partnership may include consortium, main and sub-tier, or something in between to minimize the risk burdened by a single entity. 

b. Nominated Subcontractor

In practice the owner may actually designate the maker of the system and equipment based on confidence and trust the brand bearers have exhibited. After award the winning contractor has to sign the sub or supply contract with the specified makers at least to overtake the partial responsibility of delivery, which always include risks begin with engineering, then making, shipment, installation, commissioning, test run and until operation.

In other words, the signing parties has to share whatever may have happened with the owner: strike, sabotage, mistakes, bad performance, act of god, all kind of disruption that may occur.

When someone is asked to buy aggregate, steel or tiles, he's not supposed to spend or provide so much in monitor and control as in the cases of buying a system. And under the circumstance, we call it handling charges as it will include cost for persons assigned for coordination and communication, bank guarantees, insurance premium, legal expense for the nominated subcontract. 

However, many people are still ignorant about modern day project. During budget establishment, there will be bureaucrats, design consultant, auditors and financing people reject the idea that the contractor need overhead to handle the nominated subcontract. They consider the frontage contractor won't increase anything physical on the equipment or system to be installed and thus added no value on the works. 

The denying of invisible cost stemmed from the days the economic output mainly counted on agriculture and manufacturing. The ignorance causes big problem in pushing the works forward; another proof that the fix for engineering and construction contract must come from culture and mentality changes.