Part 7, Advanced Civil Construction

台科大高等土木施工學教材(2023)

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 required logistic.

 

The general contractors used to own machines, in the days they're expensive related to human cost and company asset.

 

When a country starts to build infrastructures, they need to move earth, lift heavy weight, paving concrete and asphalt, and deal with confronting water or other inaccessible.

 

There're machines typical to do these jobs and we call them the prototypes: bulldozers, cranes, graders, trucks, mixing plants, paving machines, compactors, work boats, etc.

 

Training of operators and workers are quicker and more economical these days as computerized simulation being introduced for training and the machines become simple in their build-up, maintenance and repair.

 

The repeating usages of machines is attainable in fledging economies, also the capital to buy them is comparatively less than before; thus the delivery of infrastructures will be more efficient.  

 

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 structures of similar dimensions are designed and built successively.

 

The bespoken construction plants, either will be maneuvered and launched by the people, such as advance shoring for bridge superstructure; or will be forwarding automatically as boring machines for the tunnel. It is something that a civil or mechanic engineer can conceptualize, design and assemble.

 

It must be noted that when the bespoken construction plant finishes its job, normally it has to be scrapped because difficult in storage, maintain finding similar project for reuse. 

 

c.     Machine, portable and fixed type, mobilization and assembling cost

 

Most of machines can be transported to construction sites, either by self-driving or mounting on trailer for 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 or hazardous places disembarkation and the installation of plants and equipment can be difficult, slow and costly that the engineers have to work out the solution.

 

There is also possibility that the damages will incur to the parts or entire plants during transportation and assembly. Effective protection will take time and cost; commercially insurance policy shall be bought accordingly.

 

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.

 

Even the plant is designed and made strong for reuse, the bulk volume to store and its maintenance requirement during long wait will force the owner to scrape it.

 

施工機具或設備主要有定型與訂製兩種，前者如挖土機、吊車或打樁機等，各有性能適應範圍，買者可依需求購置；後者如隧道鑽掘機，橋梁架設設備等，需依預定完成構造物尺寸、性質、周邊情況與操作安全性等，特別設計製造，非現貨供應。施工機具有運到工地馬上可以使用，或需在現地安裝、試車，移動與拆遷，等兩大類。工程師擬訂計畫或投標時，需考慮動、復員時間與成本；因機具租賃或外包普遍，故此部分被認為含於租金或外包單價，常被忽略。

 

(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 big companies would buy machines as main asset and source of revenue.

 

For two reasons the machine ownership had to be overtaken by specialty companies:

 

i). Facing human cost rising, and labor and safety laws fastidious and draconian, only companies able to concentrate effort to manage problems related to operation, maintenance and repair are in a position to handle the machines.

 

ii). Companies owning big fleet of machine wouldn’t have chances to share costs with other companies as each general contractor compete to get the business.

 

The machine owning cost, in general, shall be calculated as buying price plus interest payment over the machine's service life and thus obtain the so called flat depreciation cost.

 

The other is weighted depreciation method, perceiving that the first 2 or 3 years the machine will have high productivity and put the depreciation cost higher in such period.

 

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

 

Interest payment can be considered for each company in total, and outside machine cost calculation.

 

持有機具所需購置費用，其將產生利息等費用。不論機具是否使用，其即有折舊成本，依機具性質或政策考量，其可採平均與加速方式，計算折舊成本。政府稅務單位亦有其折舊年限規定。

 

b.     Maintenance and Repair Cost

 

Machines need operators to move them, the owners must pay the operators hourly wage and overtime. In addition, machines also need 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 the later part of work life. The elements of repair cost consist of two parts: labor, and the other as 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 order to save labor cost, they’d identify the failed compartment and change accordingly; and in developing countries, the repair workers have to examine the parts more thoroughly and only change the damaged parts as few as possible.

 

Also, in places 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 machines are relatively expensive, the owners won’t care to pay high wage to the operator as it’s now a small fraction of the revenues from higher productivity.

 

Right or wrong, the repair workers and operators for construction machines in the developing economies may be more dexterous than their counterparts in developed economies.

 

維修成本最重要為零件與人工。工資較貴經濟體，詳細檢查耗時耗費，零件採用整組換掉方式。開發中國家工資相對機具成本低，給工人薪資可以較高，以要求機具產出效率。

 

(3) Rental and owning.

 

Started from 70's last century, general contractors ceased to own construction machine and the reasons are: i) investment was big to buy equipment; ii) business opportunity was uncertain over long period; iii) difficulties to handle labor relationship with operators, maintenance and repair workers under the labor law; iv) judgement over replacement or repair of major parts requires specialty knowledge.

 

It is proven that the general contractors have no way to replace the small entrepreneur for construction machine owning as operation/ maintenance/repair is concerned.

 

Nowadays in Taiwan where the sense of entrepreneur is high, the equipment rental rates can be as high as buying price of a plant returned in 2 years.

 

分工專業化結果，大公司不再持有機具，甚至大型設備。向租賃公司租用或工作外包，成為解決之道。

 

(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 the construction projects; 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 as in the cases of North America.

 

The reasons could be incidental because the people first introduce them to Taiwan just did it inadvertently and others just follow suit. This plus the fact that the local operators can be dexterous to maneuver the machines over the narrow and congested sites explaining fully that the back-hoes are popular in Taiwan.

 

Number of machine available for rental would draw down the cost thus affecting the user’s choices. Tower crane rental is an example. Because the buildings are now taller and mobile crane as substitute is restrained for occupying too much of the side walk, so the use of tower crane is required. A virtuous cycle is induced proving that the constructor’s practice can be changed for economic reasons.

 

In Taiwan, when the officials establish budget and draft contract for projects, they need to specify the types and the modes of machine to justify rates and sums. It’s a rationalized process but sometimes inflexible bureaucrat and supervisors will call for the usage of the same equipment appeared in the price breakdown; consequently, causing troubles.

 

Traditional “build according to the drawing” contracting could be excessive if everything shall be interpreted with “according”. The system has to be liberalized so as not to choke the constructor for their flexibility to select right and inexpensive machines. It also a proof that that the introduction of DB or EPC is necessary.

 

施工方法與設備選擇關係工程成敗，工地與工作特性應考量，市場情形與業主認知亦是關鍵。

 

b.     Machine and Manual Labor

 

In countries like India, machines face strong competition from man and vice versa. For example, bulldozers and earth moving machine has to be levied with high tariff and surcharges, so that men and their assistant working with spades and dustpan will have chances to outperform mechanized construction.

 

When we say the civil engineering, and construction is local, choice between man and machine is apparent, because machine absolutely is foreign. When the economy is still under development like India, augment of local employment shall be considered first.

 

Back to the India construction market, the wages paid 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.

 

經濟型態不一樣，人與機具亦有競爭；機具作業手、保養工相對於非技術工在較後進經濟中給付會較高，但對機械之生產力要求亦會較高。

 

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. For example, when spatial dimensions are particular, physical obstruction needs to be overcome, , or automation required to speed up construction.

 

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

 

設計與建造非制式施工設備時間長，工程師應估算。施工機具系統中一部分或某單獨設備故障，整體完全無產出，故需考慮備用。變數太多，非制式施工設備於次一工程在使用機會不大。也因此非制式施工設備之殘值，承商不能考慮太多。但統包式契約投標時，承包商即可考慮將所有非制式施工設備用於工程施工。

 

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 meet the project requirement and not differ much from the outside world.

 

In fact, the overwhelmed material requirement of a gigantic project may sometimes 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 quality and punctual completion. 

 

Still, 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 a disaster to a contractor who doesn’t know how much risk he’s taking in obtaining the construction material for the project he’s bidding. Normally, the contractor staying long in the market will understand that the probability and magnitude of price fluctuation are high; and only the so-called escalation clauses in the contract can offer minimum protection. Or the tenderers must mark up their bid price.

 

Traditional construction method and material can be available and inexpensive for bulk construction, evidenced by several hundred years of using history. Also as described above, the projects are there for economic development so that the employment of local artisans and labors shall be considered since the design stage.

 

營建廠商需儘量考慮使用本土常使用材料，設計者自開立規範開始，建造商於購買使用即應注意及此。習慣、文化、可得，以及龐大運輸成本都是使用本土材料之有利因素。

 

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 saving of cost and time. 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.

 

 

文明進步讓建材來源更加廣泛，不惟建材本身強度、品質提高，其製造及用於施工之方法與設備，乃至構造物需求標準之提高，都讓人類更有選擇。

 

c.     Green Construction

 

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 scheming would be different when the work requirement changes and regulations are revised or the new laws introduced.

 

減碳及綠色施工要求，亦將造成營建產業之變革。

 

(2).   Material and Equipment 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 simply clearing the composition, dimension and strength of construction material.

 

When proper delivery of system and equipment, and their installation, operation and maintenance, is desired; prior check and mutual commitment shall be made with reliable makers or specialty contractors even before the contract is awarded.

 

An experienced general contractor knowing the risk implied in the contract signed with ever demanding client will seek teammates working in different field to discharge the huge responsibility for successful delivery.

 

Type of cooperation may include consortium, main and sub-tier contractual relationship, or various form of partnership suitable in each case since before the tender.

 

Between general contractor and system specialty contractor has to be in line with market practice for cooperation; and their undertakings must be complementary at least technically.

 

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 main contractor has to sign the sub or supply contract with the specified makers to overtake the deliver responsibility for their part.

 

Scope of the subcontract works undertaken by those nominated shall cover the risks begin with engineering, making, shipment, installation, commissioning, test run and operation with main contractor responsible for the interface coordination, progress control, and quality supervision.

 

Normally, in addition to contingency provision the cost shall include persons assigned for coordination and communication; plus fixed percentage on top of nominated subcontract price for bank guarantees, insurance premium, financial and legal expense.

 

In other words, the contractor imposed with nominated subcontract work has to share whatever may have gone wrong for the nominated subcontractor under him unless it can prove that the fault is on the Owner’s side since selection of nominated subcontractor.

 

 

4)  Money

c. Owner Furnished Material

 

At times of high inflation, market instability or when owners believe by directly go into supply contracts with the manufacturers or vendors for certain material like aggregate, steel or tiles, they’re in better position to implement the projects. Under the arrangement the contractors will accept money as the handling charge not as much compared to the percent of overhead in the case that they are requested to administer the nominated sub-contract.

 

In the case of Owner Furnished Material the handing charge is paid supposed to cover the cost that the contractor receiving, storing and keeping properly the material furnished by the owner; and not to cover the overhead and provision needed to complete the contractor’s responsibility according to the contractual conditions as explained above.

 

But there will be bureaucrats, design consultant, and financing people during budget establishment, reject the idea that the contractors need overhead to handle the nominated subcontract or the handling charge for Owner Furnished Material.

 

They consider the frontage contractor won't add substantially anything and following up the delivery making everything good and in order is their obligation.

 

The denying of invisible cost stemmed from the days the economic output mainly counted on agriculture and manufacturing (Physiocracy). The ignorance causes big problem in pushing the works forward; and a further proof that the construction works sometimes need cultural and conceptual fix.

 

因工程大型化，複雜化，尤其運轉、維修之數位化、自動化使永久性設備及材料不再限於傳統營建商面對之鋼筋、水泥，業主與設計者常需於施工標開始之前即要決定供應重要建材或各種子系統之廠商，與他們談好價錢與重要契約條件，於承商得標後轉到主契約下，要求主包商負管理、協調責任。

 

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

 

Because the construction contracts are with big money; public or private owners will choose forms of payment according to their financial conditions.

 

The ways of payment include cash, kinds or goods (barter), deferred payment after completion and transfer to the owner (BT), or through franchise revenue (BOT, PFI).

 

The contractor must evaluate its own ability to accept the form of payment, for example, when he would have accepted the payment in crude oil over long period, he has to consider oil price fluctuation for long term or bear the cost and the remaining risk to buy the futures.

 

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

 

契約付款最為重要，除傳統付款方式，有以物易物、遲延付款、特許權等方式。承商需注意自己能力，並了解業主信用。

 

(2) Standard international contracts to regulate: FIDIC, NEC3 (New Engineering Contract3), AIA(American Institute of Architects), JCT forms of Contract(Joint Contract Tribunal)...etc.

 

It's not enough that the contractor will get the owner's pledge to pay him. It depends on the contract conditions through which the contractors get paid.

 

Normally we'd have type of contracts such as: FIDIC, 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 needs to read carefully even the author of standard contract or the Owner would have claimed they're the friendliest contract terms.

 

According to the payment conditions, the contract can be divided in forms like the conventional Rates and Quantity, Lump Sum, Guaranteed Maximum Price, Alliance, Cost and Cost Based, etc.

 

契約形式甚多，在台灣有政府範本；國際人士許多引用FIDIC,，英國協土木工程多採用NEC3，建築則有JCT範本，美國人則用建築學會之AIA。另依付款形式則有Rates and Quantity, Lump Sum, Guaranteed Maximum Price, Alliance, Cost and Cost Based等。

 

(3) Non-technical People to Control 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, that financial, legal and management people intrude and colonize uncompromisingly.

 

Though money is everywhere (QE?), but they’re dear. It takes so-called experts to invent ideas to attract the capital, they provide guarantees, mitigations and assurance to fascinate investors.

 

It is the trend, lots of the construction projects are controlled by hordes of non-technical people who can tease the investors.

 

For example, the government has plain financial resource for construction project and spent almost exclusively for construction related items last century. But now, big chunk of money will be paid as financial cost for BOT and/or PMI as people argue private fund is useful to create more public works for the benefit of the people.

 

A decent part of money will go to the so called independent third parties for their certificates, report and affidavits at non bargain-able cost (handled by the non-technical people) to ratify the security of capital while the construction hands need to compete each other.

 

Engineers must realize, somehow, they’re now playing secondary role in the construction project; but because of it they could concentrate in technical matters and become a better manager than people of other disciplines invading the profession.

 

面對變化層出不窮的契約形式，工程師必須承認非工程專業人員在契約與務款方面已多少取得主導權，以往只花在工程的款項必須支付財務、法律與商業人士，以保護業主為名所花的種種費用。他們必須有信心，且自覺工程成本也只有工程專業人士才能做好，才能重拾主導地位。

 

5)     Market

 

(1).   Contractors of 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.

 

The running cost for a Class "A" contractor is low in Taiwan, the expense will be fee paid to the registered PE, a tiny office, plus a clerk to answer the bell. When the bosses cannot get business, pay such the low cost for "hibernation", will allow them hanging on for long.

 

The sleeping contractors will wake up when they get contracts and then to recruit managers and engineers to activate the company. Taiwanese people aren’t against shoot and off employment as most of them like to stay in the area like big city or home town.

 

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

 

But once it is provoked by market turmoil destined to happen every few years, 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, the contractors wouldn’t have sufficient contingency provision will go for broke. The number culled will be significant but it will rise again if there is market re-juvenescence.

 

The process repeats again and again; the contractors go up and down riding on the changing tides. The ones with bad luck will capsize, but too many of them survive. One moment, the contractors' number will be swelling like lemmings grow to incredible amount in short spring time; the other moment the nature will drive some of them jumping the cliff and the rest follow subconsciously.

 

The market is still there for another cycle; but the professionals wouldn't have chance to lead the trend while public has to bear most of the cost that speculators should have to pay.

 

台灣營建業者，數目太多，都以中小企業心態經營，無風險概念，進出市場容易。非專業但樂意投機者能夠生存對注重品質，科班出身之工程師與工程品質是威脅。

 

(2) Type of Bid Competition and Evaluation: 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 served as bench mark for the contractors. The winning price was considered as true market cost or the officials follow them shall be subject to official chastisement.

 

Automatically, people, the budget builders or the tenderers will consider it as a bench mark for similar tenders. Vicious cycle begins and the awarded prices have to wait for another episode close to force majeure for correction; of course, it's always late.

 

Evaluated lowest bid is taken with the hope that the best contractor and their offer can be selected as the champion to win the tender; however, the selected may not be the most outstanding one, and the judges' supposed imparity is often challenged.

 

Authorities had sometimes to amend the criteria with the aim that it must be more fitful for particular tender but more susceptible to criticism. So, the evaluated lowest bid system stopped at 2007 in Taiwan, and BOT and PMI also suspended. The lowest bid tendering system prevailed for the next decade.

 

It is true that in recent years the contractors don't make money. They kept tendering and performed the contracts only to sustain the company. They couldn’t afford to pay senior engineers because of the poor overhead earned; the result is the loss of expertise.

 

There will be limit to which the contractors take the construction contracts because they can’t make profit after all. The result is tenders "aborted" or the execution in chaos. So, the evaluated lowest bid is coming back. There’s possibility and also a reasonable hope that the authority may get lessons from flaws happened in the past.

 

The criteria to select the best tenderer for the tender shall be rationalized, especially that the persons to be assigned as "judges“, shall be men of integrity.

 

Current tendering rules propping the idea for EPC will nurture bigger and more public construction companies instead of the small entrepreneurs who always cut corners of the fair competition is said to be the solution to correct the market for persistent fragmentation.

 

It could be a well wish and hind sight, but seeing the implementation of FCPA (of the US) and similar laws of various states, the big and public companies can be supervised more thoroughly in the entire process.  

 

The final goal for government spending shall be "Value for Money", in which, the project completed will worth money spent. It’s idealistic but we suppose the introduction of more liberal ideas, moderate as it may be, will bring in the progress.

 

競標評審，由最低標轉為最有利標，最終目標應為「物超所值」，如此市場才能進步、正常。

 

(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 apparent capability, past experience and planned execution plan for the tendered project.

 

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 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 people with reputation for review.

 

The process will avoid complain that the judgement in supporting contract award is made subjectively so as to prevent the outside criticism and interference.

 

It's true that during the selection of the winning contractor, the authority and invited judges have to "play god" to weed up the weaker or the unfit, and the result maybe that the selected aren’t the perfect ones because many factors are involved during tender and later execution. And in Taiwan, public and the industry may not be patient and easily to find someone as scapegoat.

 

However, the rules shall be respected and endured for some time to see what if it will change the construction industry players and whether or not that the professionals will be allowed to lead the ring.

 

承包商有不同能力、履歷、對招標工程更應有最佳執行計畫；故除價格外，招標者應確實審核承商投標文件中所提供之工法規畫、過去完工時程、安衛紀錄、經驗、在建工程、現有技術及管理人才等資料。一般國際標審核，機關或其委託工作團隊，必將就投標廠商提供文件所顯示，根據前面所訂標準評分，再送高階或禮聘有名望人士複核，與台灣目前逕請評審委員評審，主、客觀程度有差，是不同之所在。

 

(4) Defying the International Norms.

 

Until 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 the establishment to enjoy privileges and power more than their competency in the industry.

 

If the Asian contractors want to go overseas or the western investor coming to their country to build something, they may have the problems to follow specifications and conditions alien to them.

 

And in recent decades, the foreign owners already accept the idea that the projects need to be guaranteed for their success will go for every detail to ensure nothing will go wrong and therefore favorable the western establishment.

 

So, despite the new comers may have good engineering knowledge, construction skill and the versatile capability completing the works, they are handicapped in the international construction market, where the established western companies set the rules of the game.

 

We believe it's not an intended design by any known nations or covenants of them, but it’s difficult, to change the universal conviction soon. Because it’s a capitalist practice that the distrust is used as the excuses to safeguard the people’s interest that the parties involved in the construction contract have to adapt and accept.

 

 Part 6, Advanced Civil Construction

台科大高等土木施工學教材(2023) 

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

(mtkaoforum31@gmail.com)

7. Resource Required for Project Implementation

1) Man

a. Power to drive Individuals and Organizations to achieve Business Goal:

- Nature of Power 

Man loves power. Unlike animal content with existence and reproduction; human desires are essentially boundless and incapable of complete satisfaction.

A large proportion of the human race is obliged to work so hard in obtaining necessaries that little energy is left over for other purposes; but those whose livelihood is assured do not cease to be active, they look to power and glory. So, young people start to drift in the world will wonder why the needs of obtaining the two become imperative for those have something.

The easiest way to obtain glory is to obtain power; this is especially the case as regard the men who are active in relation to public events. The desire for glory, prompts the same actions by the desire for power, and the two motives may be regarded as one.

Power exhibits in many forms, such as wealth, civil authority, and influence on opinion. No one of these can be regarded as subordinate to any other, and there is no one form from which the others are derivative.

- Organization

Among the phenomena featuring construction industry, "Man" is most relevant.  Because people can't be alone to work out big and complicated structure and buildings, they have to be molded into "organizations", to synchronize different expertise and sized up strength, then are capable of serving the society as a meaningful member of construction industry.

To make them functional and contributive, organizations need to be given goals, compatible resource, and rules for participants accepting rewards and punishments as inducements. So, there must be leader(s), hierarchy, and systems in an organization. It means engineers won't be immune from influence of power maneuver, only that an innocent engineering freshman may hesitate to touch.

- Leaders

However, in an organization where technology and experience are crucial to success, naked power manifested on the leader assigned through investment, heritance or tradition without assent of the follow members will have to share power with doyens of superior skill and knowledge for their cooperation. It's the same that commercial people will get their part of power when profitability is major concern. 

When the organizations become big and complicated, power from creeds and over opinions of public will be another origin. As a result, the leaders or candidates for them will be restrained for the power, and the organizations' behavior will have to be institutionalized. 

So, the entire system become more business-oriented at least in this part of capitalist world because we are sure that any organization, public or private, shall perform according to the principle of utilitarianism that worth taxpayer, shareholders or expert's trust. 

- Power Distance 

It takes different guises from person to person, and there's possibility that the leaders may pursue and profit from enacting their own agenda using their naked and traditional power, but it won't be conflicting that the follow employees who gains nothing will be vicariously cooperative as they seem also to share superficial achievements from the leaders.

It's the fact that "genuinely cooperative enterprise" often appeared in Asian countries where "power distance" can be big between each layer of management. In In such an organization the young startups are always taught only to listen and the quest to satisfy their curiosity sometimes will be regarded as offensive, though minor as it is. 

But the deliberation of power in an engineering organization will affect its benefit, loss, even survival. Individuals always humbly don't like to touch non-technical issues and think by doing so they can be shielded from power manipulation of imperious person.

And it is wrong that people pretend they’re apolitical, instead, they’ve to care about the leadership and history of the organizations they want to join or deal with, not least for the reasons to judge and decide whether or not there’re people with whom it’s worth to fight together.

And it has to be noted, as organizations differ in size and type, common to them is the tendency that power sharing inequality will increase as member number increase. It's a confusion to young people who may have justice and fraternity in mind to consider the management in big company is rogue and exploitive. 

The power distance in an organization shall be kept as short as possible because the proportion of self-motivated and highly intelligent workers among the young generation is rising, vision articulation, action orientation, and management-by-exception are required, all depending on good communication.

b. Managerial cadre and their Recruitment:

- Inflated Titles for Professionals

A successful engineering company requires good balance between managers, professionals and occupational. But the balance could only be achieved when number and quality of the "man" employed matched operational requirement.

Among all, loyalties to the company or the boss personally in an industry where small entrepreneurs are everywhere, are most important. It means steady employment that the "man" can be recruited and assigned to work places for required period under reasonable conditions. Qualification to fit the jobs is basic, and more than that, the hired must be trusted for many inter-person deeds taking places every day in construction industry.

In Taiwan, there're 3,148 Class A Contractors, 1226 Class B Contractors, 7465 Class C Contractors, and 566 Specialty Contractors toward the end of 2022. Also not a smaller number of Consulting Firms, Architects and independent PE Offices have been registered.

That it means thousands post of which titles equal to general managers, and senior managers are wanted in the industry. The result is that the construction companies or consultants cannot hire those experienced enough for positions; and people also don't have opportunities to learn management or technical skills required in the career. 

- Recruitment

Under the circumstance, market fragmentation is ensured as many small companies or institutions in the industry struggle for survival. But people still cherish their titles such as vice president, manager or director of the companies even the jobs asking them to do works of more occupational content than professional ones.

The situation further worsens when authority tried to introduce project management system supposed compatible with international practice. Under the system, each position in the project organization requires the license or certificate, which makes the recruitment more difficult.  

Unless there is an overhaul in construction related companies that the vicious cycle to train and hire engineers will be repeating. Make it plain, the decimation of underperformed companies should be required, so that the fragmentation of market can be prevented. Engineers with better disciplines, grade, and initiative, will be able to work in more neat, clean and efficient 21st century construction industry.

- Diploma Over-Trump Proficiency

Conventionally, general public always considers diploma is equal to people's ability and it compels the authority to accept the idea that expertise can be tested through examination. And it turns out, the project owners and the parties responsible for supervision wouldn’t look into the true curriculum of job candidate. 

The outcome that bureaucrats waive their objective judgement to evaluate the real capability of proposed project staff, is that they have to use dull and useless contract stipulation to fortify their essential requirement in work safety, quality and progress; only to torment the submitting contractors.

c.  Professional and Occupational 

People working in the industry understand the difference between Professional and Occupational is whether or not they’ll use brain all the time. However, they must be aware a professional can easily and unconsciously become an occupational. 

The situation may include they practicing routine and unchallenged work too long, or simply losing the brain power to reason and judge.

Always the changes in the market or industry will bring in the impact, that people have to wary if their income are hardly raised or the employers asking for more training and test for the same job they’ve carried out. 

d.   Project-based or Department-oriented (functional) Management:

- The General Contractor’s Shrived HQ

As it evolves, emergence of the subcontractors to undertake the field work in lieu of the main contractor becomes a trend seeming irreversible. And when competition goes further, many of the main contractors withdraw to the point that they don't keep sufficient engineers to stay in lowest notch of expertise. 

The educated retained by the companies won't divide the works in line with disciplines, levels and grades truly demanded by the complicated system.

The recent project management system imposed by government to supervise the public work has an intention to assign more engineers for various discipline of construction so as to develop expertise for engineers over the course. 

But the companies cannot follow because elaborated and calibrated division of the works require more engineers to fit the jobs with more salary to pay thus weaken the parties' competence. Also, it's a realty that there're more than10, 000 constructors, consultants and architects in a small market busy for engineer recruitment.

All combined together, the general contractor’s will always be undermanned and have a shrived HQ.

- Project-based Management, Functional department-oriented Management.

Only a few companies in Taiwan have fortune to expand their organization into big, and sophisticated matrix structure, in which both project-based and functional department-oriented management co-existed and support each other.

As we’ve shown above, many entrepreneur-led companies with limited business volume have to adopt project-based management, of which, the practice is to assign people to site offices meeting minimum requirement imposed by the client. 

The project offices are presumed to gain technical and management backup from knowledgeable engineers in each functional department, however, it couldn't be done as fierce competition to get the tender has hallowed head offices; we saw the veterans disappeared over time.

Consequently, people are reduced only to work on projects of which the design and construction are general and routine because they don't hold engineers capable of developing know-hows of projects. But in reality, the companies have to establish for the project something similar to matrix organization to furnish the required support provided by both project-base and functional department-oriented system. 

- Design an organization adapted to the actualities and open to the future development 

According to Max Weber (German Philosopher and Sociologist), an organization can be designed in consideration of the following:

* Task specialization: Tasks are divided into simple, routine categories on the basis of competencies and functional specialization.

* Hierarchical layers of authority: Managers are organized into hierarchical layers, each responsible for its staff and overall performance.

* Formal selection: Employees are selected on the basis of technical skills and competences, acquired through training, education and experience.

* Rules and requirements: Employees know exactly what is expected of them. In this sense, the rules and requirements can be considered predictable.

* Impersonal (Impersonality and Personal Indifference) : Regulations and clear requirements create distant and impersonal relationships between employees, 

* Career orientation: Employees are selected on the basis of their expertise, deployment of the right people in the right positions and thereby optimally utilizing human capital.

d. Personal and organizational behaviors:

-  Company Culture related to Size

Personal behaviors are different from person to person, also in different time for the same person. When an organization is formed, it behaves as a person but like persons it will have different faces overtime. It depends on the leaders very much; especially the way he handles coordination and communication. 

Organization mainly consists of engineers and ruled by them can be stiff and fastidious in giving orders and executing them. The reason and the result maybe it need to avoid mistakes and at the same time push things forward. 

But people with more liberal or creative thought may not appreciate and can be shut put; not good to business development and technological innovation. To mitigate that, a motley style of coordination and communication in a big company is highly valued.

-  High and Low Context Cultures

When organization is small, cultures can be defined as "high context”, more inclined toward relational and collectivist. Message can be spread effectively aiding by gestures, relations, body language, verbal messages, or non-verbal messages between individuals.

But when organization grows big, communication shall be more explicit, direct, and elaborate; because under the circumstance the individuals are not expected to have knowledge of each other's histories or background, and communication can't be shaped by long-standing relationships between speakers. They depend more on the words being spoken rather than on the interpretation of more subtle or unspoken cues. In such case, the organizations need low context culture.

"High" and "low" context cultures typically refer to language groups, nationalities, or regional communities. However, they have also been applied to corporations, professions and other cultural groups. Though not all individuals in a culture can be defined by cultural stereotypes, it can roughly classify: 

＊ In elementary school, classmates and teacher fixed in the same classroom all day know each other; it is high context. In the university, professors and classmates come and go, interactive only in the class; it is low context.

＊ In smaller companies, boss know every employee, give orders and evaluate performance himself; it's high context. In big companies, management layers are many, the communication needs to be made in meetings with minutes or written mails, power must be delegated and the bosses are distant; it is low context. 

＊ The lawyers and accountants talk and writes to identify the truth, and it must be precise in words and numbers, they're of the lower context; the engineers and businessman next, while the farmers deal with the same lands and climates for life can be higher context.

   

＊ In nations or societies where the benefit of group is emphasized over individual, higher context cultures dominate, such as the Asian countries, probably an extension peasantry economy. While mercantile vigor was developed in European and North American countries; it can be lower context. 

People grow up in different context of culture will have distinct response toward the organization which he is hired; however, he can judge how or whether or not he can adapt or fit in the career, if he has the sense about the cultural context. And it is possible that people can change his thought and behavior when he is young.

e. Labor laws, quality, incentives, and unions

   

- Labor and Taxation Laws in Taiwan

Working at site as construction people or supervisors will have to follow the weather instead of the calendar for their agenda. 

There's considerable improvement for employees on the aspect as labor law and regulation interfere; but the employer especially the big companies may not be able to observe to the law completely. It's also one of the reasons that sub-contractors and work gangs are introduced to the project for execution as they may be more "flexible' to follow the law. 

More than law abiding for overtime assignment, smaller company in Taiwan can pay corporation tax in deemed amount in exchange of lax scrutiny into their books. It means sometimes they can neglect or under report their employees' personal tax, retire fund or health care premium. And beyond monetary evasion, they can be audaciously to recruit employees especially for foreign blue collars not obtaining legal stay permit. 

A well-organized company in construction industry will consider laws amended in favor of employees are draconian, and tend to be meticulous toward recruitment even for white collar professionals. So, when construction or design companies have to rely on dispatched people to fulfill minimum contract requirement, they actually leave the responsibility to lay off people to manpower dispatch agencies; which is big departure to the professionalism.

- Taiwan’s Scrupulous Professionals 

In Taiwan, a few professionals have problem to develop expertise. They lack patience to pursue the knowledge and expertise. They incline to accept jobs corresponding with their quest of titles and income for short term benefit. So, they put more attention on employment conditions more related to income, welfare and work places. Some of them may need to share with spouse for family chores and tend to work on regular hours. 

We learn that the professionals are working with their brain and are hardly quit the job for entire 24 hours a day. It means if they can cut clean with the work after office hour, they’re not better than any occupational for at all. 

There could be a compromise likely to be reached with an irresponsible employer to sacrifice the work quality, but, and it opens the chance for those don’t have formal engineering background to fill the vacancy; thus, a degradation of professionalism.

Yes, it’s an industry that toil and sweat still overwhelm the brain-exhausting work style and leaving rooms for occupational. But the projects management system, public or private, continue to request the inclusion of certificated and licensed engineers, then people having engineering education and training may have chances to claim their dominance.

 (Part 5, NTUST, 5908701)

Part 5, Advanced Civil Construction, 台科大高等土木施工學教材(2023) 

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

(mtkaoforum31@gmail.com)

6. Remuneration, Feeling of Fulfilment, and Chances of Promotion in Different

    Entities.

   

1) Academy 

a. Nationalization and bureaucratization of educational institution.

-  In medieval Europe, universities meant a place where students from everywhere were welcomed as they shared the common language-Latin and religion- Christianity. They were taught the arts and had at least one of the higher faculties (theology, law or medicine), by those with a master's degree. So, the term was studium generale as the aim was to provide students and the general public academic foundations in line with the humanistic roots.

- And the changes begun from Germany in 19th century, the academic study was considered more essential than to disseminate the knowledge to students and the general public as Von Homboldt maintained in his Berlin University. Instead now that the students were asked to select a topic, profession, or social problem conduct research on the subject, maintain a portfolio of findings or results, create a final product demonstrating their learning acquisition or conclusions.

 

The capitalist American went farther to introduce the ideas for universities and the colleges to become “technology research center” either by accepting chunky donation from privates or obtain funds in collaboration with big companies for programs. As the result, the “university” actually is “multiversity” and become kind of “knowledge industry” entice the talents and transform them to be “useful” in the market.

- As it evolves, there’re many academic communities of different scientific subjects established in the universities. The institutes have to achieve the goal assigned to them in the research program and so require the combined effort of various faculty members for minimal multiplicity. And it means the organizations have to be sizable to include scholars of different disciplines; specialists, technicians, and in some cases, the managers.

And because only the government or the donors can pay the money to sustain an organization of meaningful capacity, the nationalization and bureaucratization of the university is unavoidable. Then the autonomy of faculty is gone that the professors has to respect the imposed hierarchy, follow the government procurement law, honor the quantified evaluation system. And it means, the young men decide to work in the academy for life needs to know everything about scholar’s recruitment, pay, and promotion as many of the civil servants do.

There can be countries with thrive industries and successful businessmen granting huge sums of money to the university. For all their best intension or pragmatism to inspirit innovation, the receiving parties may proceed to employ needed people for the advance study programs not related to teaching and study. 

In addition to the salaries and bonus given to the scholars and specialist, tools, software and apparatus required to advance the innovation can be paid, thus facilitate the general study as well. 

Therefore, the conventional boundary between the ivory tower and the outside world is blurred. Lucky or not, the campus grows and aggrandized; but it looks as if it were a technical center of big company, buoyed, motived and boosted by the same market force plumped the industry.

 

- Cambridge and Oxford could be the last to insist its tradition that the university should bend on the “liberal education” to nurture the gentlemen. But in 1956, the UK government astonished that the country lagged much behind the US and Soviet Union in technology and science; had to issue a whitepaper for higher education mainly to accept the promotion of Colleges of Advanced Technology (CATS) to university level. 

The UK faculty leaders shared the government’s view realizing the fact there should be scientific culture in addition to the humanity culture, and the “Argument of Two Cultures” had to come to a hold. 

- In certain countries the university can be supported by charities, donation and wealthy alumni just like the universities and graduate schools in the American Ivy Leagues so as to be free from the government interference. 

b. Fate, connections, and politic may play part in the assignment and promotion of faculty positions.

- In theory, the assignment and promotion in the public faculty will be fair because the qualification set for the contested is stringent and people responsible to smack the decision are supposed wise and objective in such an independent organization. But in practice, the odd is high that the un-qualified may win out as they know how to use the connection and politic skillfully.

So, for those who expect the meritocracy will prevail in keep the academic body lean and competent can be disappointed.

The other side of the coin is when universities are funded by public money the regulations for personnel management are rigid, and less influenced by the powerful or the unprincipled. 

- Sometimes, the faculty may have their unique requirement for particular topics for researches, they may recruit scholars who would provide talent at that special moment and then they may start academic career; it’s the fate. The opposite also is true when an eligible can’t be picked over years just because lack of luck.

c. Inspiration, heart and soul are still required in developing scientific and engineering theories.

- People get fame in academic career may claim later that there’s no coincidence in his success and tell the young man to work hard because scientific and engineering theories can only be accomplished through endeavor. It’s true but not necessarily that the hard work will invite the success. Young starters have to learn that the aspiration is required in the process to initiate an idea, fill the void and perfect the defect. 

- in develop some theory in their career, often the people will place their attention more on time and effort they’ve spent over the issues and await the aspiration come to add favors on the plain calculation. It’s not realistic and people has to have heart and soul if they want to do scientific study. 

- People who are mediocratic actually shall avoid to pursue the academic achievement. 

d. Limited monetary remuneration augmented with infrequent plaudits complete full reward scheme of scholars.

- Monetary remuneration is limited for people working in academic. There may be something in compensation for the low income, that is the feeling of fulfillment and achievement. 

A real scholar will feel happy when he discovers or believes that he will be able to offer next generation people a branch of knowledge, though may not be perfect or permanent, even the plaudit is short and rare.

- However, the modern university may change. As we said, it will change to “knowledge industry” in collaboration with companies thirsty to find collaborators for technology improvement. We’ve witnessed big business pour in chunk of money to finance faculty in an unprecedent manner. 

The law also modified to allow people other than pure wonks join the faculty to conduct researches; and the pay is not subject to any limitation. Bonus and other incentives are offered to the people who’re supposed to be acclaimed for their virtue.   

2) Professional entities such as architects and consulting firms

a. The professionals don't produce, manufacture or build, they offer design report and solutions based on expertise that can hardly be quantified; so, they receive bonus and prize based on subjective review in addition to the fixed salary.

People who’re admitted to big architect and consulting firms are expected to listen to the orders and to begin as a simple part of complicated machine. Remuneration wouldn’t be high as the company consider you gain more in learning as new comer.

Promotion, or work adjusted for next stage seem to be taken grant; but mainly depend on your altitude. 

b. Managers of architects and consulting firms are critical to create a sound work environment for efficiency, recruit people of high talent, take the lead in competition, recognize and reward those who work hard with decent pay, and find the new customers and win their trust; so, they deserve high income.

Even though the market is not small in some of the countries, the architects and consulting firms would have their fix clients. The relationship cultivated are between, in most of the cases, the institutions and not the individuals. It’s very apparent in Taiwan, and the individuals have to be careful in asserting their business credit.

 

c. As a trend and also out of necessity, capital gains such as profit, dividend, interest, rent and royalty are offered to the employees in the form of company stock, partnership, or special agreement.

When the majority of shares held in government or big organization, the persons in custody tend to be more conservative and the not the persons running the company lose an effective tool to manage the company. It’s the situation for the two biggest civil engineering consultants in Taiwan. 

d. The rates and prices of consultancy contracts are low by international standard, so that the professional’s pay is restrained in Taiwan. 

The professionals, especially those in the consultant firms, have to work long time to get enough money compared to the engineers working in the other countries. The difference in annual remuneration between the senior and junior engineers are not so much and it decreases the incentives of the employees. The reasons are again, partly due to the government’ holding of the shares for big consulting company. 

The small, private and localized consultant firms always submitting low price is also the reason that the professionals in Taiwan don’t have good income as their foreign counterpart.  

The civil engineering consultants always require top talents, but, many of them ceased to work hard for the nature of the company and the difficulties to draw a smooth and reasonable clear path; many of them are said to have early retirement. Recently, it’s improving at least for the employees as demand is increased.

3) Construction firms

a. Contractors command more resources than any other players in the industry and the pay difference among their staffs is significant and decided by project profit and loss.

For the same project, different managers will significantly make the resulted profitability completely different. Therefore, the bosses will carefully choose the manager or won’t delegate any power to the under in the case of small company. And for big project, it requires good manager(s) and qualified staff to work around the clock. There’s nothing but to offer strong incentives as the boss is concerned. 

And it means, a devoted and smart employee will be able to distinguish himself in the construction firms. 

b. In Taiwan, the owners prefer low cost and hasten progress with obsession. So always construction companies are put under extreme pressure to meet contractual requirement, and only staff (leading by a relentless boss) can withstand the grinding work condition will get higher pay and the employment, not much to do with their proficiency, not mentioning feeling of achievement.

c. Reformation that allows the constructor to do the works in design and build has been introduced to the market, and now that the industry is less fragmented so the construction firms can grow and allow the professionals either technical or managerial developing their skill and climbing the company ladder. 

d. Specialty contactors if have more control on expertise shall be more dominant as the nature of the works now are more than simple concrete pouring and rebar binding when economy evolved and the project more complicated.

4) Government Employees 

a. In Taiwan and many Asian countries, the government employees are prestigious and respected despite its low salary and limited power. The reasons may be the employment is permanent and the work isn’t manual. In the case of civil engineering, the mandarins are responsible to certify the progress in every stage and accept the completed stuff of the project, highly influential to the public works and the contractors. So, it can be the top choice of graduates.

b. But as the economy grows the government enact many laws and regulations, which aren’t flexible in nature for implementation but the civil servants need to follow. In addition, the politicians, media and public frequently overrule the professed opinion; making young engineer uncomfortable and hesitate to go after the government posts. 

c. At the time when resources were scarce, only the government would be affordable to import construction technologies and appeal to the talents to work for big projects. It’s attractive for engineers. Now that working for private companies could get even better access for modern technology under more discerning evaluation. The incentives for young talents to work for government are drastically reduced.

5) Bosses or self-employed

a. In a market-oriented economy, the individuals are free to exercise will and power in their own enterprise plus that the sub-let system in Taiwan will allow new comers to deliver the works easy; then the threshold to start construction business looks low. Many young people thus select to become entrepreneurs before they can learn something as other’s employees.  

b. A contractor needs capital, follow engineers, business connections, access to resources required for execution, and above all a mentality to lead the teammates you want to summon for successful performance; therefore, it requires years of experience. But the rigor and aggressiveness to found an enterprise will only be attached to a young brain, then you’ve to determine whether to be boss or self-employed at early stage of your life.

In other words, “connection network’ shall be critical for the young professionals seek to establish their own business. It can be supported by family or friendly ties; but most importantly, the future boss shall look carefully into his own personality and take opportunities.

c. However, construction people often risked to become accomplices of authority, super or sub tier contractors stealing public money. The temptation is overwhelming: providing bad material, not build according to the drawing, faulting the contracts. The bosses always excuse themselves for the need of survival. But actually, they like to enjoy lucrative contracts and believe they’re well protected. 

Nevertheless, the systematic fraud could be exposed and the professionals forsaking ethic principles would be sacrificed by the politicians. 

Unlike many countries in developing worlds, Taiwan escaped endemic corruption during and after the days massive infrastructure projects are under construction. If you want to be a boss in Taiwan, the risk is smaller.

d.   The boss of modern days construction company practically needs to know he shall also be a good manager in an organization to lead a team of knowledgeable workers, who are skilled, motivated, and challenge-seeking. It is because whether or not the business will survive, prosperous and develop will depend on the boss’ ability to articulate a vision of the future to inspire the people. It is necessary to let them believe their future are included in your plan.

In other words, people need to examine before they want to become the bosses or super managers in the engineering or construction companies, their competency of technical and interpersonal skills including being open to the truth, treating everyone fairly and equally and sticking to their principles.

Also, the boss must be sure that himself shall equip with an intelligence to embody the value of his organization, impose the integrity on the follow professionals, and culture the resilience to maintaining the momentum of the organization when business is in setback.

 

(Part 4, NTUST, 5908701)

Part 4, Advanced Civil Construction, 台科大高等土木施工學教材(2023)

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

(mtkaoforum31@gmail.com)

 

(1). Banks

 

Banks offer credit lines, grant loans, and acting as agents to collect or pay bills, draft, and cheques to companies or individuals doing business of construction and engineering.

 

Banks issue guarantee letters or cheques to the clients for bid bond, performance bond, advance payment bond, and warranty bond at the request of construction companies, design consultants, professional engineers, and architects.

 

In many cases, banks will issue letter of credit for contractors to buy equipment, material and service required to complete the project.

 

There will be overdraft facilities for companies to pay outstanding cash amount reasonably required in performing contracts.

 

Banks will evaluate the profitability, sizes, collateral, and reputation of the company, and grant them credit lines or loan, and quote the premium and interest rates subject to fluctuation over time.

 

There is possibility that the banks agreeing to offer loans for BT, BOT, or BOO projects, based mainly on feasibility, completion guarantee, and the ultimate owner of the projects (and in the case of overseas projects, the government and the owner). Usually commercial banks need backups of fund, investment companies or even state.

 

When construction related entities wouldn't obtain the credit lines as required or the existing credit amount sharply reduced, they could be pushed toward insolvency. The consequence usually is very serious and could probably invoke chain reactions for subcontractors and sub vendors for several times the amount main contractors indebted.

 

If the state won't go for rescue, banks, subcontractors, vendors, their employees will be induced for damages like the case happened to the second biggest contractor, Carillion of UK (https://www.arlingclose.com/insights/what-happened-with-carillion). But normally in a democracy, no sane politicians will vote continuing to finance the troublemaker, that's why banks are cautious in Taiwan.

 

(2). Insurance Company

 

a.      Most of construction contracts need insurance company to provide coverage for damages to property and persons related to the projects unless it happens due to excepted risks.

 

The employers wish themselves and the follow contractors to be compensated for maximum and paying fee in minimum. The public work owners are big customers so they will prescribe what they want in the contract document, and insurance companies and the contractors usually will comply the stipulation.

 

However, in many occasions the crooked contracting parties, seeking to reduce even very few percent of the insurance premium, will ask acquiescent insurers to provide conforming policies with covert agreement deleting the critical clauses demanded by the employers.

 

Though the insurance companies ostensibly are more law abiding these days, but there are brokers sticking to the old way doing business. It’s not fair to the honest contractors.

 

b.      Compensation to the contracting parties poses as a hard bargain when perils occur. The appraisers' proffer can be wide ranged and unpredictable. The approaches are much influenced by the commercial interest of the insurance industry, which is conflicting to the requirement of the insured, not mentioning the request of the endured.

 

The reality in Taiwan is that many of the contractors don’t pay much attention in safety requirement and spend money for proper construction facilities. When peril occurs, the insured may come up with plumped figures and ask for compensation.

 

There were stories that the re-insurer like Lloyd's of London rejected to reinsure tunnel work construction of Taiwan in 90's as many "Names" losing so much money. There were days that many tunnel failures occurred in Taiwan, whether or not they were the result of complicated geological condition or insured’s wicked intention o solve the progress and cost problems, we didn’t know. But we understand that the local appraisers and insurers weren’t innocent.

 

c.      Note always the proposed settlement has more to do with the commercial convenience of the insurers than what the contractors ought to accept. In other words, the staff and the managers of the contractors shall resist the mesmerizing persuasion by the policy sales and appraisers.

 

The insurance policy buyers shall study words by words for the compensation clauses attached to the main policy; and be careful about the practicality of the blockers, insurance company and appraisers before they procure the policies.

 

d.      In the United States, the project surety is issued mainly by insurance company or bondsmen for the full contract amount or its double. It's a different philosophy that the US employers want to be guaranteed for in-time and quality project completion so the insurer or bondsman needs to provide greater than or equal amount of project value to convince the employers that they'd have ability to finish the works.

 

And in place like Taiwan, the employers demand pays immediately an amount no less than their loss in the project with reservation that they can claim the difference of their loss later. Once people in Taiwan advocated that the insurance company can issue policies to serve as performance bond or for other purpose but find it difficult to implement, so the alternative only remains on the law.

 

e.      The insurance companies are involved so much in the construction projects, they're indispensable, but many in the industry including high ranking persons have wrong concept toward the insurance. The biggest problem is they can't distinguish the difference between contingency cost and insurance premium paid, the mistakes come from that they considered everything can be covered by insurance.

 

They may recognize there should be price escalation and it has been covered by inflation formula, and they continue to think that any other risk shall be identified and priced in the work items and a risk that can't be named shouldn’t be a risk. 

However, an experienced constructor will perceive that it is a cost attached to the project only in a way that nobody will know how and for what magnitude it will happen.

 

Finally, people responsible to establish the project budget will consider the contingency provision shouldn’t be entered for unnamed items lest it should become the additional profit of the tenderer. It’s wrong but widely accepted by the officials here.

 

(3). Investment Company or Fund

 

The international investment company or fund strolled around the globe seeking opportunity for investment in infrastructure projects as they felt revenue should be stable and return lucrative. But they were meticulous in Taiwan as they cared about the risks in design, construction and operation of those projects may not be in a way they’re familiar with.

 

The tedious regulations imposed by the government and "not in my backyard" populism would be detrimental to the budget and progress issues which are most critical to the infrastructure projects: returns are slower and lower, financial overburden heavier, and the market changes cancelling the necessity of the projects. And in the extreme case, the franchise company can be bankrupted.

 

So, the international investment company or fund including Japanese trading houses have to wait until now, start to buy shares of solar power plants, wind mills and sewage system when they feel the government, industry and the related player are more matured with regards to PPP initiative.

 

The international investment company or fund do bring in another risk mitigation concept: placing more emphasize on unanticipated and disadvantageous market changes in demand or supply, and the long-term interest rates and the underlying asset value; subject to variation in the so-called risky macro environment.

 

There can be two types of investment in infrastructure projects: one is to secure the opportunity for investment when everything is still blank considering that the profitability is proportionate; the other is to take over the project when everything is known and the return fixed shunning of risks.

 

In Taiwan the real estate business elicits capital and talent for its high growth and profitability. Developers are busy to hunt lands, deal with building codes, handle design and construction, and sell house and mansions, that they're not so interested in PPP initiatives. They could be tomorrow’s investors for ppp (public-private partnership) initiatives.

 

(4). Operator

 

After completing the public facilities, the government agencies or the private plants or building owners need people to do operation, functional checks, servicing, repairing or replacing of necessary devices, equipment, and machinery; and sometimes for system adjustment and expansion. The requirement hastens the delivery of the new facilities while many of the owners don't have the experience to do O&M especially the government agencies under recruitment, financial and efficiency restraint.

 

They're O&M companies, which should be an inseparable part of construction industry, always working under the poor financial conditions as politicians and capitalists over the world are good at dispense money for new fund buildings and facilities but less generous for their operation and maintenance. But now it is different.

 

Technicality will also be favorable to the O&M companies. The Engineers and the Contractors alike need the Operators' feedback to get sufficient knowledge for new facilities. 

And it's a tendency that the government prefer to using public–private partnership for O&M of the facilities to solve problems of lacking of flexibility in financial support and employee’s recruitment.

 

Over the years, the owners, government or private will ask the contractors to offer engineering, construction, plus O&M; there will be different models, and more sophisticated management contract will include improvements in efficiency and performance, which only is possible to include as much scope of service in one hand.

 

As it evolved, the Operator may be required to collect bills on behalf of the utility company, and may accept some collection risk, especially the clients are governmental, and the customers will be general public.

 

Engineers of next generation must think about whatever he will be, it tells of tomorrow’s engineers to realize the profession is service oriented, and to follow money's lead.

 

3)      Third-Party Participants: notaries, law firms, inspectors, laboratories, certifiers, appraisers, unions, arbitrators

 

The modern construction contract bring in piles of paper plus those un-printed storing in the computer, most of them presented as letters, reports, records, sketches, lists, certificates, diagrams, affidavits, pamphlets, photos, books, all of them filled with words, lines, symbol, sound, totem enough to decide the success or failure of the projects, though nobody is able to read through.

 

It's more than computer technology that the frontage players, supporting entities and participants of construction contracts all are the accomplice to ask for more document. For example, when contractors want to get loans, the banks may ask them to get reports from law firms to examine the contract conditions and to ensure the applicants are accepting everything. Or, the clients may demand the records of successful operation in completed facilities, certain laboratories may be asked to do the inspection works and submit the reports accordingly.

 

When the required documents bearing the names of the supposed independent party and showing the subject party has met the requests are received by the enquirer, it will be deemed as true and authentic. And as it evolves, there will be development such as:

 

* The party which demands information only trust prints from certain parties. Because the former now depend on the latter to identify the authentication of submissions from strangers or aliens.

 

* Though that the verifying party shall be independent and only responded to the requesting party, but the demanding party will have a big say to recommend the "right" verifying party; and in most of the cases, the requesting party will comply.

 

* If the verifying party has long working relationship with the requesting party, he would have more confidence to verify what he needs to verify within sort time frame, though they are independent and neutral. It happens to law firms, inspectors, laboratories, certifiers, appraisers, and arbitrators.

 

The industry reward regular customers, so big companies that always have more chances to contact third party participants will find it's easier and more swiftly to work out required document demanded by their clients. It's the same that the independent parties or organizations who are reputable in their domain also receive more recommendation from establishment.

 

Languages and culture should be the problem but not the only, the reality of the world is that the westerners will go to international arena using contracts, codes, standards, specification and practice the same as what are used in their homeland. The advantage is more apparent when the third-party participants with fame are confident to endorse them; actually, sort pf fortification.

 

Asian contractors go out to compete international giant, would have encountered invisible barricades, sometimes can be fatal to the projects. The story can be simple just because he wouldn't be familiar to and get supported by the established third-party participants who historically are not accustomed to working with oriental minnows. Right now, they’re real third-party participants.

 

Despite its laissez-faire appearance, 21st century capitalism is complicated in its work division, allocation of added values and borderless monopoly to collect rents.

 

In construction industry, the conventional added value attached to exercise of craftsmanship and dexterity to maneuver the machines now become relatively small as competition is harsh between the same contractors of developing economies. The new added value is created even to surpass what can be obtained from the exercise of the substantial works. The people familiar with "norm", "standard", and "proof" usually can avoid to do the risky and competitive tangible works and usually are done by the firms and organizations in the developed economies.

 

4) Stakeholders: Public, Authority, Neighborhood and Locals.

 

(1). Public

 

The public are the users of infrastructure and facilities, but they are volatile and can be convinced for opposite proposals. And it seems only the politicians claim they’re their representatives are knowing everything and the engineers have little to say for the true benefit of the public.

 

The professionals in Taiwan aren’t prestigious and dignified facing the public, instead, the media, councilors and TV host will be louder in all technical aspects than the engineers. Because the public demand 100% perfect over construction projects: budget, progress, durability, aesthetic, and functional for at all time, which are not possible in engineering, but they are spoiled because they’ve votes.

 

The politicians will take chance at the expense of the professionals, who will be depicted as pedant never knowing the true requirement of the people and the progressiveness of the society. 

Of course, there will be sometime that the public will be awakened learning politicians won't fulfill their commitment but the professionals has been tainted during the process. It’s easy in Taiwan the professionals including those from academic will be the scapegoat but their credit will never be recovered.

 

Infrastructure construction sometimes is associated with corruption and scandal, and some professionals may be involved, giving the impression that the engineers are not cleaner than the officials and councilors. So, the public is skeptical to the construction contracts and insist to have stringent supervision and they may feel comfortable when there will be supervision on top of supervision.

 

And when, most of the government agencies in charge of public construction in Taiwan openly claim that they will accept the citizens to supervise the construction works, a political approach, is a hurt to the professionals.

 

(2). Authority

 

The Authority referred here means the government agencies responsible to award permits, edit regulations, or decide the applicable codes so that the owner and the contractors shall observed for planning, design, construction, occupation and operation from initiation, completion until operation.

 

Land acquisition for public works shall be local government's responsibility, and usually it’s a procrastination process; maybe 5% of recalcitrant landowner will stop 100% of the works for commencement; and you’d see every day in Taiwan.

 

Safety measures are the critical issues that the government will demand the owners and their contractors to follow though. If incident to happen, the law and regulation will allow the authority (under Labor Ministry and their local branches) to exert severe punishment

 

It’s also possible that the public attorney can indict the representatives of the companies or institutions for crime charges. It’s also part of the reasons that the man contractors would sub-let the works to smaller companies with the ideas that the subcontractors will shoulder the responsibility.

 

Traffic diversion plans around the site in congested towns and area can be critical which the foreign companies coming to Taiwan will have difficulty to think about; but the commuters are sacrosanct. One of the impacts to urban construction, for instance, can be the use of more tower cranes in lieu of the mobile cranes.

 

Disposal for wasted and surplus material shall be subject to the grand soil reuse and disposal plan by local government; in general, the cost of excavated soil dumping is “managed” by people close to mafia and hardly the outcome is rational.

 

Utilities authority poses another problem for the developers and the contractors; outstanding drawings and missing locations cause the digs delaying and costly. Sometimes dangers would emerge.

 

License for buildings and plants shall go through the utility authority to ensure links with existing system. In Taiwan, utility company is called company, but people would think it's a kind of authority, not least they are run by government.

 

The fishing, agriculture and irrigation cooperative surely are the juridical association membered by ordinary people, but they are offered with the rights for fishing, planting and irrigation in their premises, to which any encroachment shall be bought with exorbitant price through hard negotiation.

(3). Neighborhood and Locals

 

The mentality of Nimby (Not in my back yard) affected construction very much; nuclear power plants and its refusal treatment can't be solved, for instance, as well as substations and transmission lines.

 

Roads, parks and sewers can't be built in many places as people don't want to be disturbed even for short time. The stories may be dated back to the old days that the authority abuse the power conscript land and put the people against construction down.

 

And now it goes for another extremity, for example, people don't want to accept any deflection or slight damages in their house when the excavation nearby have influence even within the tolerable value. Some of the people exercise extra judicial means to stop the works. It happens in chemical and power plants the neighborhood always cemented together to bar or interrupt construction and operation.

 

The governments of all level are relatively weak because the officers and councilors need votes; temples and churches for their grass root nature always sided with neighborhood defying the legitimate development. It's devastating but foreign and sometimes people from big city not well aware they are standing in lower ground if Buda and God aren’t stand beside them.

 

Many business people might miss the days when construction wouldn't have any problem to deal with ordinary people decades ago. But it's the democracy that people have chosen the system to defend their property and will; and as it flourishes the developers and the contractors must have patience in communication with the neighborhood and locals to move the project