management control system in spvs for infratsructure projects_a k gupta_05082008
TRANSCRIPT
Paper Title: Management Control System in SPVs for Infrastructure Projects
Author’s Name: Anil Kumar Gupta
Affiliation: Director Public Private Partnership, Ministry of Railways,
Government of India, New Delhi
Mailing Address: Room No. 537,
Rail Bhawan, New Delhi-110001
Phone No. 011-23382783, Fax 011-23382783
Email [email protected]
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Management Control System in SPVs for Infrastructure Projects
ABSTRACT
Project Management challenges in Infrastructure is enormous in the face of abysmal past
record of government departments in project execution and growing investment need to
meet with the projected GDP growth of our country. Indian Railways (IR) is also
witnessing similar pressure on faster project execution front due to larger need for
investment in capacity augmentation and modernization projects. This paper examines
the project management experiences on Delhi Metro Rail Corporation and IR, the latter
having relied primarily on three models for project execution: dedicated construction
units under zonal railways, independent construction organizations under departmental
fold and Public Companies or Special Purpose Vehicles (SPVs) created for specific
project or group of projects. Delhi Metro Project is the biggest success story in
infrastructure project management during the last one decade in India. The author having
worked on this project for five years in the planning as well as construction he describes
in detail the success story in the project management of the 4.5 km underground corridor,
from Vishwa Vidyalaya station to Kashmere Gate station, which was commissioned in
December 2004 about seven months in advance of the scheduled date setting new
benchmarks for standards in safety, quality, environmental and public utility
management. The paper also briefly describes the 2007-08 performances of IR’s zonal
construction unit at Chennai and Rail Vikas Nigam Limited (RVNL), an SPV. The author
then goes on to propose a new management control system containing six key elements:
Leader, Organizational Structure and Work Culture, Responsibility Triangles,
Contracting Framework, Project Management Consultant, Monitoring System, and
Buffer Management and System Review. The construction unit of IR, RVNL and DMRC
have been evaluated and compared on this new management control system and based on
it model characteristics of the management control system for SPVs created for executing
infrastructure projects have been proposed.
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INTRODUCTION
General
Developing countries, like India, needs huge investments in infrastructure.
According to one estimate1 about US$ 500 billion is required to be invested in
infrastructure during the next five years if India has to achieve 10% growth rate in
GDP. This requires faster execution of projects posing major challenges in Project
Management. The present Indian scenario in Project Management is not
encouraging. Often Governments announce big projects but fail to get them
executed for years. As per a Government of India (GOI) report2 568 major
projects costing over Rs. 2 lakh crore covering 16 different sectors suffered an
average cost overrun of 22.7%. A further peak into the details provide a grim
picture: two projects under Health and Family Welfare sector suffered a cost
overrun of 388.2%; 17 projects under Urban Development sector suffered a cost
overrun of 108%; and 2 projects under Water Resources suffered an overrun of
198%. Similarly the scenario on time overruns is also grim: 3-240 month in Coal
sector; 171 months in Information & Broadcasting; 8-168 months in Power; and
6-147 months in Road sector.
Railway Projects
Project Management scenario on Indian Railways is also not encouraging. During
year 2008-09 IR would invest about Rs.37,500 crore out of which more than
Rs.11,000 crore would be invested in construction of new railway lines including
doubling and gauge conversion3. During year 2007-08 total 2300 km of Broad
Gauge lines (including 155 km new line and 500 km doubling) were completed
and another 3500 km line is targeted to be completed next year. However with the
sanction of several more projects each year, the number of projects on the shelf of
IR is increasing year after year and with that the time and cost overruns are also
increasing. The report cited above puts the average time overruns on railway
project at 8-168 months. Most of the time overrun could be attributed to the
rationing of fund allotment as numerous projects compete for adequate fund every
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year. For an example of cost overrun one may look at the Udhampur-Katra new
railway line project that was sanctioned in year 1995 at Rs. 189 crore. The cost
was revised to Rs.540 crore in year 2006 and the project is still ongoing.
Railway Project Companies
In order to overcome the departmental limitations in expeditious project
execution, Ministry of Railways (MOR) has gone for creation of dedicated project
companies, also known as Special Purpose Vehicles (SPVs), under the Indian
Companies Act 1956 for executing special railway projects. Konkan Railway
Corporation, created in 1990 for executing and operating 760 km coastal railway
line connecting Mangalore to Mumbai was the first such SPV. Since then a
number of SPVs have been created for executing various railway projects such as
Mumbai Rail Vikas Corporation (MRVC), Rail Vikas Nigam Limited (RVNL),
and Dedicated Freight Corridor Corporation of India Limited (DFCCIL). Gupta
and Roy, 20084 have brought out among other things the need, form and
success/failures of such SPVs in managing railway projects. KRCL succeeded in
completing a technologically complex project in a record 7 years time which was
the first of its kind in Independent India. It also succeeded in developing cutting
edge construction expertise and achieved the best project management standards
in railways. Mumbai Rail Vikas Corporation was created in 2001 for up gradation
of suburban railway infrastructure in Mumbai. RVNL was created in 1993 for
executing Rs. 15,000 crore National Rail Vikas Yojana involving important
capacity augmentation projects, three mega bridges and several port linking
projects. DFCCIL was created in 2006 for execution of the prestigious Dedicated
Rail Freight Corridor connecting the four metro cities in India.
Urban Infrastructure Projects
The general experience of execution of mega urban infrastructure projects in
cities and big towns hasn’t been encouraging either. In Kolkata, 16 km
underground metro line had taken 23 years for completion between 1972 and
1995. The city had experienced massive disruption to traffic and routine city life
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during the underground construction. The experience was such that it had created
a question mark about the feasibility of construction of another underground
Metro line in any other city in India.
For commuting public in cities in India the nightmarish scenes of construction on
roads for sewer, fly over and pipe lines have become daily routine not evoking
any serious reaction at all. These projects create traffic chaos with pot holed roads
filled with mud and dirt, unruly road diversions, no traffic signage etc. Over and
above there would be ugly signboards reading “Inconvenience is Regretted, Work
in Progress”. Not many people question why the commuters have to necessarily
go through this horrible experience for months and often years? Even if someone
dare to question, the reply from the topmost bureaucrats might be: “We have to
bear this if we want better infrastructure to be built in city”5. There appears to be a
sense of helplessness at such project sites with no clear organizational structure or
management control system in sight for tackling such project management
challenges. Lack of successful urban project management models further
perpetuates this sense of helplessness and people continue to think that this is the
way infrastructures in cities are built.
Delhi Metro Project
Delhi Metro’s project management has been a contrasting experience than what
was witnessed elsewhere. It created new benchmarks in completing works before
target, managing traffic at work sites in a manner much smoother than existing
before the start of construction work, achieving international standards of safety
and quality management, creating a brand building platform for contractors and
designers, and utilizing latest technology in the most cost effective manner for
completing the phase-I of the project in a record time of 7 years as against a time
frame of 10 years set in the detailed feasibility report in 1995. Officers, engineers,
contractors, designers and consultants having experience on this project have
increased their market value tremendously and are in great demand in the
government as well as in private sector.
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Present Treatment to Project Management
Literature on project management exists mainly focusing on private sector that
too for non-infrastructure projects. There is hardly any literature analyzing
success in project management of infrastructure projects in government sector in
India. Project management in government or public sector managed projects in
India is mainly discussed in conferences and seminars. But these are related more
to study of failures in terms of delays, cost overruns, accidents, poor public image
etc than to case studies of successes. A review of time and cost overruns on
projects in India reveals following principle reasons6:
• No committed fund
• Commencement of construction without proper investigation and planning
• Faulty contract packaging resulting into poor selection of contractors
• Undue hardships to public resulting into court interventions
• Inferior construction technology
• Frequent changes in chief executive
• Delay in land acquisition
• Casual and indifferent project management
• Contractors failing on the job
• Midway changes in the scope of work and poor management of the same
• Poor decision making process
Awareness of above reasons is necessary yet it is important to know how these
reasons were overcome in successful infrastructure projects. This brings out the
importance of studies of good success stories of project management, which are
rare in India. Insights into DMRC’s success in executing phase-I of the Delhi
Metro Project will serve this very purpose. Comparison with the project
management control systems adopted in IR and a railway SPV would further
bring forward the elements of management control system that could be adopted
elsewhere in order to replicate the same success stories.
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Some of the questions that are targeted for answer in this paper are: How is IR
managing railway projects? What is the reason that IR has been creating new
SPVs for executing such projects? How did DMRC succeed in executing metro
project so well while Kolkata Metro failed to achieve the same level of success?
How is DMRC different than a railway SPV like RVNL? Does any Management
Control Framework emerge out of study of these models of execution of projects?
Can this framework be implemented in a government department or only an SPV
be able to do this?
PROJECT EXECUTION BY IR
Construction Units of Zonal Railways
IR is organizationally divided into 16 zonal railways based on regional
jurisdiction. Each such zonal railway is headed by a General Manager (GM) and
the organisation under him consists of 9 line departments (known as Open Line in
railway parlance) each headed by a officer known as Principle Head of
Department (PHOD). Smaller construction works are executed by the respective
technical line departments. However for carrying out bigger projects a separate
Construction unit headed by Chief Administrative Officer (CAO) functions under
each GM. CAO is generally from civil engineering (commonly known as
Engineering within IR) department7. This is a multidisciplinary unit including
Signalling & Telecommunication (S&T) and Electrical engineering officers and
having separate finance and personal services working independent of the line
departments. These units are project organizations for zonal railways. Some zonal
railways viz Northern Railway (Delhi), East Central Railway (Hajipur) have more
than one Construction units based on the size and number of sanctioned projects
as well as annual fund allocation. Recently, for speedier execution of important
projects, Construction units specific to such project has been created; three such
units (for development of new production/ workshop units) in East Central
Railway and one such unit (for Jammu and Kashmere railway project) in Northern
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Railway have been created in recent years. All these organizational units are
extensions of the departmental set up of the IR.
Separate Departmental Organizations
MOR has also created special units for execution of bigger Projects. Metro
Railway in Kolkata was executed by such a special organization which later was
converted into an operating railway like 16 other zonal railways. Similarly Central
Organization for Railway Electrification (CORE) was created at Allahabad in
1972 for executing railway electrification projects over IR. Both these
organizations are now headed by separate GMs. Further, Northeast Frontier
Railways based at Guwahati has a construction organization under a GM separate
from the Open Line GM. But these organizational units are also departmental set
up of the IR created for a specific or group of railway projects.
Railway Project Cycle
A typical new line railway project starts from sanction of Preliminary Engineering
cum Traffic Survey (PETS) in the railway budget. On completion of PETS the
preliminary cost of the project and its financial viability is arrived and the project
gets examined by the Extended Railway Board8 and later placed before Cabinet
Committee on Economic Affairs (CCEA) for approval. If approved, the project
gets included either in the regular Railway Budget or in the Supplementary
Demand for approval of the Parliament. Once a project is approved by the
Parliament, Final Location Survey (FLS) is carried out and detailed project
estimate is prepared which require sanction of the Railway Board before incurring
expenditure on the project. This takes anywhere between one to two years time
and in some big projects only part estimates are prepared at a time and sanction of
detailed estimate for the entire project takes several years.
Performance of Construction unit at Chennai
Performance of CAO/ Construction, Southern Railway, Chennai was studied for
the purposes of this paper9. The unit consists of 2018 government staff including
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117 Group A officers. As on 31.03.2008 the unit had on its shelf 40 railway line,
6 bridge and 184 road over/under bridge projects which were sanctioned in the
railway budget ranging from 1990-91 till 2007-08. Based on fund allotted to the
unit for the year (Rs.905 crore) 15 railway line projects and 3 bridge projects were
targeted for completion during financial year 2007-08. Against this it spent
Rs.899 crore and completed 3 projects while 5 other projects were waiting for
CRS’s inspection after physical completion as on 31.03.2008. Rest all other
targeted projects remained physically incomplete. One of the reason for this was
mismatch between fund required for completing these projects (Rs. 1734 crore)10
and fund allotted during the year (Rs. 570 crore)11. Rest of the fund went into
ongoing non-targeted projects. At the beginning of financial year 2007-08 an
amount of Rs. 8,243 crore was required to complete all major sanctioned projects
in the unit, which was more than 9 times the fund allotment during the year. It
carried out 10 PETS that were sanctioned in railway budget 2007-08. It is also
executing elevated Mass Rapid Transport Project (Metro) line between Chennai
Beach and St. Thomas Mount. The first phase of this project between Chennai
Beach and Tirumailai was sanctioned in railway budget in year 1983-84 and was
completed in 1997. The second phase of 11 km extension from Tirumailai was
sanctioned in 1996-97 and completed in 2007. The 5 km third phase was
sanctioned in 2006-07 and is under progress.
Details of on-going projects submitted every month by CAO’s unit (known as
MCDO) doesn’t indicate original estimated cost of the project at the time of
sanction. CAO/ Southern Railway is maintaining a column ‘Anticipated Cost’
which shows the latest estimated cost. Hence actual cost overrun on each project
was difficult to know. Practically they cannot be considered as cost overrun as
there might have been change in scope of work, project might have been taken up
in parts, or fund might have been allotted over a long period of time. As described
hereabove, even targets set at the beginning of a year might not be realistic hence
performance cannot be judged on this basis alone. There appear to be only one
unit to measure the productivity, annual project expenditure per staff, which was
0.44 crore for the CAO, Chennai.
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RAIL VIKAS NIGAM LIMITED
RVNL was created in January 2003 for executing National Rail Vikas Yojana
costing Rs. 15,000 crore in a short period of five year time. This comprised 34
projects at Rs 8000 crores for strengthening of Golden Quadrilateral12 and
diagonals, 22 port connectivity projects at Rs 3000 crores and 4 mega bridges at
Rs 3500 crores. Subsequently several projects were changed and as on 31st March
200813 it had 53 projects on its shelf including one mega bridge, out of this 13 are
being executed by zonal railways while the funding is through RVNL. The main
purpose of creating this SPV was for dedicated and alternate funding through
public private partnership funding and better project management.
As brought out by Gupta and Roy, 2008, RVNL has been successful in faster
project execution but not so in designing PPP models for private financing except
already existing BOT-SPV model in port linking projects. Now Railway Board
has permitted Indian Railway Finance Corporation to raise market debt for
lending to RVNL for financing projects. Funds are also being provided through
railway budget as is done for Construction units. The projects are being funded
through equity (11), loan from Asian Development Bank (7), market borrowing
through IRFC (11), capital fund flows from Railway Budget (9) and private
funding through Public Private Partnership (PPP) (7)14. In the five years of its
existence it has been successful in completing only 6 projects against the initial
target of 56 projects, while 17 are in various stages of completion. There are still
18 projects which have not taken off at all. In financial terms it has spent Rs.4019
crore during this period. During the same period zonal railways have completed 9
projects for RVNL at a total cost of Rs. 1633 crore.
Performance of Chennai unit of RVNL
RVNL is executing projects through its field units each headed by Chief Project
Manager. These units are multidisciplinary in nature under one administrative
head similar to the CAO’s unit in Construction organization. For the purpose of
this paper the performance of one field unit based at Chennai was studied15. This
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unit is headed by a Chief Project Manager having a team of 11 officers and 9
other staff under him. The unit works under one roof with a 250 sq.m office at
Chennai. The unit was assigned 4 railway projects of which it has completed one
and rest three are on-going. It is assisted by a Project Management Consultant
(PMC) for each project. A total of 80 PMC staff is working on these projects. The
unit is in existence for the last 3 years in which it has spent an amount of Rs.506
crore of which Rs. 258 crore was spent in year 2007-08. The unit is self sufficient
in terms of every resource a project organization should have except that contracts
are awarded by the RVNL headquarters in Delhi. The productivity in terms of
annual project expenditure per staff (including PMC staff) is 2.6 crore which is
about six times the productivity of CAO’s unit at Chennai. Of course it didn’t
have any scarcity of fund allotment and there was no priority list for the project
and all the four projects were equally important.
Current Trends in the Organization
Over the years the organization has become bulkier with unproductive layers
creeping in, procedures has become lengthier and Schedule of Power, through
which tender and other administrative power is delegated to the organization by
MD, has become more conservative16. A comparative table is shown in Exhibit-1
highlights some these changes.
Exhibit-1
RVNL Earlier RVNL Now
Flatter organization with CPM
reporting to Director Project
Intermediate layer of Executive Director
has been created.
CPM empowered to call Single
and Special Limited Tenders up to
Rs. 5-10 crore.
Now only Open Tenders permitted up to
Rs. 15 crore.
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CPM’s power of purchasing stores
through quotation-Rs. 5 lakh each
time with no Annual limit
Rs.10 lakh each time with Rs. 50 lakh
annual limit
With leaner corporate office
approvals used to be granted by
the headquarters within a few
hours or at most a few days.
Now with much bulkier corporate office it
is more procedure oriented in which
approvals take days or even weeks.
When a contractor failed, CPM
was empowered to take corrective
action such as offloading works to
other contractor in the interest of
achieving target.
A time consuming procedure to be
followed for any risk and cost tender.
Project completion takes a beating.
The trend seen in RVNL could be said to be a natural trend for any public SPV as
it grows older. The challenge for project manager is to guard against such decline
that shifts focus from achieving project completion targets to making procedures
more accountable.
PROJECT MANAGEMENT AT DELHI METRO PROJECT
General
Before analyzing the success of DMRC it is necessary to place on record a
perspective that was the hallmark of its approach toward managing the mega
project. Any new urban infrastructure project brings major investments in the city
development. Hence the agency developing the infrastructure is in a better
position to manage and maintain the civic amenities such as roads, traffic safety,
utilities and pedestrian footpaths affected by the project during its possessions of
site, than the usual line agencies responsible for maintaining these services. The
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three main reasons are: better availability of fund, simpler processes and direct
return to the project in terms of faster and safer work. There should not be any
hoarding on the road at a project site reading phrases such as ‘Inconvenience is
Regretted’, ‘Work in progress’, ‘Please bear with us’17. All these messages
indicate poor planning, incompetence of agency and callous approach toward
public and are first indication that the project is likely to have accidents, cost
overrun, time overrun or otherwise the project is being executed at the additional
cost of public, who pays in terms of higher fuel cost, pollution, accidents and
general inconvenience. The hoardings at the project site should be a welcoming
sign for the public identifying with the agency and the contractor and further
expecting better roads, smother traffic flow and safer environment.
A rail based transport system for Delhi was first proposed in 1969-70 by Central
Road Research Institute. During the period 1970-1995 several studies were
carried out which suggested several alternatives ranging from MRTS, LRT,
Magnetic Levitation and Tramway. Present system is based on a RITES report for
198.5 km Integrated Multimodal MRTS consisting of elevated, underground and
surface corridors. A Detailed Project Report (DPR) was prepared in 1995 for
Phase-I consisting of 65.11 km to be completed in 10 years by 2005 with a loan
from Japan Bank of International Cooperation to the extent of 62.5% of the
completion cost. Delhi Metro Rail Corporation (DMRC) was registered in May
1995 as a Special Purpose Vehicle (SPV) under the Companies Act 1956 with
equal equity participation from the GOI and Government of Delhi for
implementation of the project. The phase-I of the project was approved by the
government for implementation in September 1996. DMRC started functioning in
November 1997 with the appointment of Managing Director, Dr. E. Sreedharan.
He handpicked other senior officers including the functional directors and created
an organization of his choice. A General Consultant (GC), a consortium of five
international companies PCI, JARTS and Tonichi from Japan, PBI from USA and
RITES from India, was appointed through open international competitive bid for
assisting DMRC in the project implementation. GC appointment was due to a pre-
condition for the financing from JBIC and it played a very important role in the
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project management. Phase-I consisted of three corridors which were significantly
modified by DMRC as compared to the recommendation in DPR in order to take
up the busiest corridor first and bring the alignment directly above the congested
roads rather than along the existing railway tracks that was suggested in DPR.
Actual field work commenced in October 1998 on an 8.5 km stretch between
Shahdara and Tis Hazari. In spite of loss of almost three years since the DPR, Dr.
Sreedharan decided to keep 2005 as the target year for completion of the phase-I
of the project, thus reducing the construction period from 10 years to 7 years. The
target set in 2002 for commissioning of various sections of the phase-I of the
project and corresponding achievements are shown in Exhibit-2.
Exhibit-2
Section Length (km)
Target Date as in 2002
Commissioning Date
Shahdara-Tis Hazari 8.0 Dec 2002 Dec 2002
Tis Hazari-Tri Nagar 4.7 Sept 2003 Sep 2003
Tri Nagar-Rithala 8.8 Mar 2004 Mar 2004
Vishwa Vidyalaya-Kashmere Gate 4.0 Dec 2004 Dec 2004
Kashmere Gate-Central Secretariate 5.5 Sep 2005 Sep 2005
Barakhamba Road-Kirti Nagar 6.0 June 2005 Dec 2005
Kirti Nagar-Dwarka 16.4 Sep 2005 Dec 2005
It makes almost incredible reading of the above report card for a project that is the
biggest urban intervention in India since independence. The project was executed
in a very difficult urban environment, under the critical scrutiny of media and
VVIPs. It was executed with latest construction and operational technologies that
were not available in India. The phase-I was executed at a reasonable cost of
Rs.10,500 crore through the best usage and indigenization of costly technology
and international expertise that brought down the cost per km of corridor
drastically on the subsequent sections. The leadership of Dr. Sreedharan played
the most important role in this success story.
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The project was recognized as the best training ground for contractors,
consultants, engineers, suppliers and all other stakeholders as every new bid
witnessed frenzied competition lowering down rates. Each such entity that
worked on the project came out with greater value for itself as success and
expertise was assured through excellent management control system followed on
the project. In order to have a closer look at this value proposition the project
management of contract MC1A has been described hereunder.
Management of Contract MC1A
Salient features of Contract
The contract number stands for Metro Corridor 1A and meant for civil and
electrical & mechanical works for underground corridor between Vishwa
Vidyalaya and Kashmere Gate stations. It consisted of 4.5 km of tunnel including
400 m of depot approach and four stations. The design and construct lump sum
cost contract was awarded to KSHI JV, a joint venture of four Companies:
Kumagai Gumi, Skanska, HCC and Itochu; at a lump sum cost of Rs.900 crore
and provisional sum of Rs.33 crore (for risky and variable nature of works such as
testing, artwork, architectural finishes and utility diversions which were paid by
DMRC on actual basis). The contract began on 22nd May 2001 and the completion
date was 25th July 2005 with 218 weeks provided for execution of the contract.
Contract Structure
The contract payment was structured on pre fixed milestones against which each
bidder quoted specific payment. These milestones were structured under a series
of Cost Centers: 01-Preliminary Activities, 02-Design, 03-Civil Structures etc.
The total of such payments made up the lump sum cost. However the bid
evaluation was done on the basis of present value of such payments offered by
each bidder. The cumulative curve of such payments has to match the physical
progress proposed by the contractor through a project schedule generally based on
the milestones but also including other non-payment activities. The curves are
15
generally ‘S’ shaped and hence called S-curve. The S-curves for concrete pouring
for permanent structure and milestone payments for MC1A contract are shown in
Exhibit-3.
Exhibit-3
Concrete Consumption
0
5000
10000
15000
20000
25000
1-Apr-0
2
1-May-02
1-Jun-0
2
1-Jul-02
1-Aug
-02
1-Sep-02
1-Oc t-0
2
1-Nov -02
1-Dec -02
1-Jan-03
1-Feb-03
1-Mar-03
1-Apr -03
1-May-03
1-Jun-03
1-Jul-03
1-Aug-03
1-Sep-03
1-Oc t-0
3
1-Nov -03
1-Dec -03
1-Jan-0
4
1-Feb-0
4
1-Mar-
04
Time Period
Conc
rete
Qty
0
50000
100000
150000
200000
250000
300000
Monthly Concrete QtyActual Monthly Qty Cumulative Concrete Qty Cumulative Concrete Qty
Payment S-Curve
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Jun-01
Aug-01Oc t-0
1Dec-01
Feb-02Apr-0
2Jun-02
Aug-02Oct-0
2Dec-02
Feb-03Apr-0
3Jun-03
Aug-03Oct-0
3Dec-03
Feb-04Apr-0
4Jun-04
Aug-04Oct-0
4Dec-04
Feb-05Apr-0
5Jun-05
Mill
ions
Months
Cum
ulat
ive
INR.
Equ
ival
ent Cumm.
INR Equi.
S-curve for Milestone Payments S-curve for concrete
Site Organization
Monitoring strategy included building site organization and designing a
framework of control, reviews, reporting and scheduling. GC’s project
management organization was organized parallel to the DMRC’s organization
while its site organization was organized parallel to the contractor’s site
organization so that the communication and line of command across the project is
efficient and transparent. A lean organization consisting of a Chief Resident
Engineer, a Resident Engineer, five Section Engineers and 4 other engineers from
GC and a Deputy Chief Engineer with two Executive Engineers from DMRC was
deployed for monitoring the contractor’s work. The organizational structure for
monitoring MC1A contract is shown in Exhibit-4.
Planning and Scheduling
While planning and scheduling the work the contractor adopted a strategy of latest
start and highest economy. It prepared a schedule that proposed construction work
in three phases using same temporary structural steel three times on the project.
Key resources like concrete batching, rebar fabrication, plant and equipments,
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testing laboratory etc were centralized for better control and monitoring. A
uniform procedure was specified by DMRC for project monitoring across all
contracts based on Primavera software. The contractor used to submit 3 month
rolling program every month showing past month’s progress and planning for
next 3 months which was discussed in monthly meeting at the corporate office of
DMRC. Similarly a 4 week rolling program used to be discussed in the weekly
meeting with the contractor at project office. An ISO 14001 compliant
management plan and procedures were developed for defining each project
activity and monitoring of quality, safety and environment.
SE Section B
Exhibit-4
PM
SM Section
PL (MC1A)
SM Section
SM Section
SM Section Line of Command
Line of communication
CPM-Chief Proj Manager; PM-Proj Manager; CRE- Chief Resident Engineer; RE-Resident Engineer; SE-Section Engineer; EE-Executive Engineer; PL-Proj Leader; PM- Production Manager; SM-Section Manager; RMs-Resource Managers
RMs 1,2,3,4
Proj DirDir Proj
CPM (MC)
Dy. CE
E. E.-1
PM (MC)
CRE
RE
SE Section A
SE Section C
SE Section D
SE Spl
E. E.-2
MD
Monitoring Strategy
Monitoring strategy was directed toward changing behavior of the contractor’s
organization. Hence separate measurement units for different departments such as
construction, quality, and safety, of the contractor were applied for keeping each
of them motivated and energized. Simple measurements such as volumes of
earthwork and concrete and respective S-curves were used to reflect overall
progress and controlling demand rates for achieving the target. DMRC and GC
adopted a hot and cold strategy- too harsh in the beginning even at the cost of
17
progress in order to force the contractor to mobilize well to face the challenge;
cyclical harshness in the middle for course correction and lenient toward the end
pushing the progress and making the contractor succeed. A series of meetings
chaired by officials at different levels from DMRC, GC and Contractor were
structured which were attended by staff from each of them to monitor progress,
resolve complex issues and obtain commitments from each stake holder.
Production Management
At a project site, production management refers to managing the physical progress
of work so as to achieve the targeted date of completion of certain portion of
work. MC1A contractor’s production management was controlled by the
Production Manager who also managed the centralized common resources.
Pipelining on common resources helped the contractor to monitor the progress of
work and accelerate progress. Weekly concrete production and rebar fabrication
plans, sectional monthly targets, daily concreting priority list etc. helped the
contractor to create competition among the four sections and push the progress
where it could be best achieved. A reward system was initiated for sections for
achieving their monthly targets: two days extra salary if target gets achieved; 4
days extra if the target got overshot by 10%. This award was provided to every
worker/engineer/supervisor deployed in the section irrespective of whether he is
employed by the contractor or its sub-contractor. This production management
strategy was a great success. It was noticed that generally the sections focused on
preparatory works at site in the first two weeks of each month and there was
intense concreting in the last two weeks right up to the night shift of the last date
of a month.
Health and Safety Management
Health and safety management of the contractor was lead by a Health and Safety
Manager who reported directly to the head of the contractor’s team, the Project
Leader, and was independent of the Production Manager. Some basic safety rules,
like wearing helmet and safety boot were applied to everyone visiting the work
18
site irrespective of his position and affiliation. Even MD DMRC visiting the site
followed this principle. Initially works had to be stopped at sites due to non-
availability of these protective equipments with the workers. This led to
inculcation of discipline which not only helped in developing safe and tidy work
sites but also generated motivation among workers and supervisors whose loyalty
was ensured to the project. An open and transparent system of reporting incidents
(not just accidents) and substandard safety practices was established in which
non-reporting of an incidence was treated more serious than occurrence of an
incidence. Focus was on taking corrective and preventive measures after
occurrence of an incidence so that its repetition and serious accidents could be
avoided. In order to institutionalize the learning from previous incidents a safety
compendium was maintained with the history and respective corrective and
preventive measures taken. This used to be discussed regularly during safety drills
and job training at site with workers and engineers. Contractor’s and sub-
contractors’ workers did have access to DMRC and GC site staff for any serious
grievance connected with payment of salary, protective equipment,
reimbursement of Provident Fund at the time of leaving the unit and
compensation for injury or fatality. This ensured minimum disruption, least
accidents, higher motivation, availability of work force and higher work output.
Quality Management
Contractor’s quality management team was headed by a Quality and Environment
Manager who reported directly to the Project Leader in a manner similar to the
Health and Safety manager. Quality management at the project was based on
conformance to the approved procedures and methodology and open and
transparent reporting of defects in works and non-conformances to such
procedures. Defects in design and permanent works were reported through non-
conformance notices while other defects were reported through site instructions
issued by the Resident Engineer to the Contractor. Once issued, each such report
had to be addressed by the Contractor through corrective and preventive measures
for enabling the Resident Engineer to agree to close the report. Closure of each
19
such important report led to revision of the respective method statements and
work procedures. Contractor followed its own similar system where the Quality
and Environment Manager raised such reports and production teams had to
comply them for their closures. The practice inculcated a work culture which was
system based rather than individual based and this later helped in jacking up
progress toward the completion of the project like well laid foundation helps
jacking up run rate in slog overs of a one day cricket match. This system was
initially resisted by Indian firms who didn’t follow it earlier but was so well
received subsequently that it became the training ground for these firms. Defect
reporting was supplemented through periodic inspection schedules at all levels
starting from MD DMRC to the Section Engineer of the GC. Some of these
inspections were: RE’s daily inspection, Construction Manager’s weekly
inspection, CPM’s fortnightly inspection, Director’s monthly inspection and
MD’s quarterly inspection, weekly safety and environmental inspection,
designer’s weekly inspection, and surprise night inspection.
Traffic and Work Site Management
The biggest challenge in planning the construction was to manage the traffic and
provide a neat and tidy work environment for the workers as well as the public
commuting near the work site. The work was to be executed on cut and cover
construction methodology requiring excavation on the road itself.
Mismanagement at this front was the biggest irritant for public at Kolkata Metro
project. Even before invitation of tender, DMRC had conducted traffic studies
identifying minimum number of lanes of traffic to be maintained on each affected
road, widening of existing roads, diversion of traffic away from work site where
required, introduction of one way traffic, improvements to rotaries and
intersection etc. The Contractor was required to even widen two bridges for
allowing diversion of buses and other traffic through them. The Contractor itself
appointed head of the department of transportation of School of Planning and
Architecture, Delhi as consultant for developing detailed traffic management plan
for period before, during and after construction including phasing plan. Road
20
signage system was also designed including its positioning for information to
public. Many practices were introduced at the construction site for the first time in
Delhi such as full height steel hoarding all along work site for complete visual and
physical separation of traffic from site, blinking lights on the hoarding for
guidance during night, steel decking for maintaining minimum number and width
of traffic lanes for excavation under road, traffic regulating staff at each
intersection and road diversion, security controlled access and exits at all work
sites. In one of the studies done by a city news magazine in 2003 it was found that
crime rate under the civil lines police station had gone down during the
construction phase of the project. This was attributed by the researcher to above
mentioned arrangements at the site. All the above construction practices were
copied from practices adopted in Bangkok, Hong Kong, Singapore and Japan
where DMRC and GC staff had visited for training. Now many of these practices
are being adopted by other authorities at their work sites but none of them have
been able to achieve the standard existing on Delhi Metro project.
Environmental Management
DMRC’s contract documents prepared by GC’s experts had incorporated all the
elements of environmental management system in compliance to ISO 14001. The
leading two foreign firms in the KSHI JV were also ISO 14001 compliant
companies. But these were not enough for ensuring implementation of these
requirements at site. One conversation with a Japanese Section Manager at site in
the initial days of project may be sited here: when he was asked by the author
(working as Resident Engineer on the project) why he was not ensuring the
standards followed in Japan at the work site when the Contractor was being paid
for that standard, the reply was ‘this is India not Japan, if all other contractors
work here to a much lower environmental standard then why he should be forced
to adopt international standard’. This conversation shows the importance of
international exposure for the authority’s and project management consultant’s
staff and the need for forceful compliance of these standards even from
international contractors. Had DMRC not ensured this exposure and allowed free
21
hand to its project team for ensuring compliance, international standards might
not have been brought to Delhi. Some of the best working practices introduced
first time on any infrastructure project in India were: tyre washing system for
cleaning of truck tyres before it entered the public road from work site, water
sprinkling system for dust control, silent generators, and conservation of ground
water by recharging and taking it to the Delhi Jal Board’s filtration plant. The
implementation of these systems ensured that MC1A work site became the first to
get ISO 14001 certification, not only on Delhi Metro project but also on any
major infrastructure project in India during construction.
Human Resource Management
Projects are temporary organizations with large number of fresh recruits hence
there nurturing is immensely important for all the stakeholders. DMRC
acknowledged this and ensured good HR practices with all stakeholders. All top
and middle level managers/ engineers of DMRC and GC were sent to metros
around the world for training at project sites. On return they became trainers for
their junior staff. A set of training modules was prescribed for all workers and
engineers at work site. Compulsory training in construction methodology, quality
and safety management systems was imparted to all new recruits at work site. GC
used to organize such training for its own and DMRC’s staff. GC’s expatriate
managers and experts took lead in preparation and conduct of such training
modules while contractor’s expatriate staff and safety/ quality/ environment
managers took lead for training of their and sub-contractors’ staff. Contractor’s
best and most experienced brains were employed for development of management
procedures, method statements, work procedures, inspection and testing
procedures and training modules which were subsequently used for training to
local staff. GC ensured that without such approved procedure no site work could
be started.
22
Managing Local Authorities
Local authorities play very important role in the success of an urban infrastructure
project. Their support in approvals, utility diversion and traffic management is
essential for the success of such project. Generally they are treated indifferently or
as adversary by the project authorities. There is a temptation to force contractors
and consultants to handle them. DMRC had a relationship of cooperation, mutual
respect and assistance with MCD, DJB, PWD, NDMC and DDA18. Some of
actions taken by DMRC in this regard are listed as: their officers were taken into
confidence in preparing relocation plans and their working contractors were
assigned the job of utility diversions, road repairs etc.; work was considered
completed only after satisfaction and official confirmation of representatives of
these authorities; retired engineers of local authorities and retired police officials
were employed by the contractor for managing utilities and traffic issues;
expertise gained at the project site in managing their utilities were shared with
them e.g. DJB got immensely benefited due to drastic reduction in block period
for diversion works on water mains by adoption of new methodology; irrigation
department was given rock fills free of cost for protection of Yamuna bund; DJB
was given additional raw water collected through dewatering process at work site
that were earlier allowed for disposal in open drains by the Ground Water Board;
group site visits were organized for each local authority with get together parties
for acknowledging their cooperation and considering them as important
stakeholders; soil filling, repairs and restoration of offices, road repairs,
improvement to utilities were some other means through which a cordial
relationship was ensured.
Managing Property Owners
Land acquisition is the single biggest reason for delays in a project. Court cases
initiated by property owners create big stumbling block in project execution.
Proactive role of the project authorities are usually not witnessed on infrastructure
projects. DMRC used various mechanisms for obtaining advance possession of
23
land ahead of the legal land acquisition proceedings to avoid delay in land
acquisitions: individual deals for land use, access to property, protection to
property, providing temporary accommodation to occupants, advance
compensation etc. DMRC even agreed for negotiated settlements with individual
owners for temporary control of land for facilitating construction work.
Winning Public Support
Community interaction programs were organized every quarter near the work site
for interaction and feedback from public, property owners, commuters and other
people interested in providing valuable inputs. Such meetings were chaired by
Director of DMRC while representatives from local authorities and traffic police
were also invited. Public grievances, property owners’ and occupants’ problems,
local authorities’ suggestions were addressed in such meetings. These meetings
provided valuable inputs for improvements at work site and in traffic
management. Representatives from media used to be invited periodically to visit
the work site for explaining the construction methodology and efforts being made
to address concerns of public. Schools and colleges along the corridor were
helped with land filling in low lying play ground, construction of higher boundary
walls etc. Adjacent buildings witnessing vibration induced by construction
activity were instrumented for vibration and crack monitoring so that the
occupants’ confidence could be won and corrective and preventive measures
could be taken in time. All these ensured good public image and helped build trust
with the public.
EMERGING MANAGEMENT CONTROL FRAMEWORK
Delhi Metro Project was executed by an organization consisting of officers mostly
from IR including its MD. It is also a public sector SPV similar to many other
SPVs created by MOR for executing projects. Hence, a natural question arises as
to what was different at this project that enabled it to get successfully completed
in a record time, without cost overruns and with such wide public support.
Description of aspects of MC1A contract management provided hereabove would
24
be useful for project stakeholders. But finding out management control system
existing at Construction units of IR, RVNL and DMRC would be much more
valuable learning for the Government and policy makers. A critical comparative
study of the three organizations on this framework would further help to find out
what management control should be generally applied to such project
organizations.
There could be many perspectives of looking at the management control system in
an organization. Existing literature on the subject focuses more on basic elements
such as types of goals, complexity, mode of control, focus on activity, basis of
control and the organizational structure. A lot of literature exists using these
elements. Anthony and Young, 200219, while describing the Management Control
Systems of a nonprofit organization stress on nature of organization structure,
responsibility centers, goal congruence of all responsibility centers, and fit
between programs and responsibility centers. He goes on to add that management
control is fundamentally behavioral and various tools are effective only to the
extent they influence behavior. Hofstede, 198120, states that the type of control
depends on four criteria: whether objectives are ambiguous or un-ambiguous,
outputs are measurable or non-measurable, effects of management intervention
are known or unknown, and activity is repetitive or non-repetitive. He suggests
six types of management control: routine control, expert control, trial-and-error
control, intuitive control, judgmental control and political control; based on
whether one or more of the criteria doesn’t satisfy the first alternative mentioned.
Anthony and Young, 2002, also state that Management Control System depends
on external environment of the organization. The external environment for a joint
venture SPV between state government and central government is different from
that of a state government or a central government SPV. Similarly the external
environment of the Construction unit of IR would be different from that of an
SPV. Similarly, the internal environment in a project organization which has to
operate train services too on completion of project (like DMRC) would be
different from a purely construction organization (like RVNL). Harrison and
Lock, 200421, suggest three critical systems of project management: Organization,
25
Planning and Control, and Human Systems. They state that a project manager,
working in a matrix organization (like Railways), cannot be complete master of
decisions affecting the project. Such manager must operate in a decision making
matrix. They further state that in a pyramid structure (that of Railways) ‘Authority
Gap’ or ‘Responsibility without Power’ is common and is not conducive to
project implementation. Based on these literatures and his own experience in IR
and DMRC, the author proposes a new Management Control System for project
organizations having following critical elements:
• Leader
• Organizational Structure and Work Culture
• Project Management Consultancy
• Contracting Framework
• Responsibility Triangles
• Monitoring System
• Buffer Management and System Review
The Managing Director of the SPV is the Leader who plays the nodal role in the
control system. The SPV being a new project organization the Leader has to build
it and its work culture suitable for delivering the project in time and within
estimated cost. A new organization is neither experienced nor adequately
equipped to handle the project management on its own. Hence it has to hire either
a single project management consultant (general consultant) for the entire project
or several project management consultants, one for each major contract for
bringing in required expertise and experience in project management. Contracting
is the mode of transaction through which a project is executed. There are different
contracting models for executing the entire project as a whole or various parts of
the project and the selection of the contracting model depends on several
important parameters. The SPV must have a rich contracting framework for need
based usage for fulfilling its overall objective. The next important element in
project management is the allocation of responsibilities within the organization of
the SPV and among SPV, project management consultant and contractor. This is
26
the nervous system of the management control system which ensures coherent
actions at all fronts and that each stakeholder plays its role to the fullest. It is often
said that the day a project schedule is made it starts slipping. Hence the Leader
must have a monitoring system built in the contracts through key dates and
buffers and their adherence being watched through a full proof mechanism.
Monitoring provides information about the health of project which has to be
properly acted upon by various stakeholders through a mechanism called buffer
management including recovery and encashment of buffers in order to achieve the
project goal. A review of the management control system along with the buffer
management is necessary to safeguard against slackness or undue bureaucracy
creeping in and also to continually improve the control system for the changing
circumstances and new projects/ contracts. This entire relationship between the
seven critical elements of the proposed management control system for an
infrastructure project SPV is shown in the control cycle in Exhibit-5.
Organizational Structure and Work Culture
Responsibility Triangles
SPV Board of Directors
Leader
Leader
Lea
der L
eader
Contracting Framework
Project Management Consultant
Monitoring System
Buffer Management and System Review
Exhibit-5
27
In order to elaborate each of the above elements the management control of the
three project organizations, Construction unit of IR, RVNL and DMRC were
analyzed on this control system. The result has been described hereunder.
EVALUATION ON THE PROPOSED MANAGEMENT CONTROL
SYSTEM
The Leader
Project organizations, being temporary organizations created for a specific project
or a set of projects, are most affected by the quality of leadership and
independence and liberty given to him for achieving the project objectives.
Hofstede, 1981, suggests political control when objectives are ambiguous. A new
organization created for specific project(s) has a clear objective of completing the
project(s) in time and within estimated costs. However there exist conflicts of
perceived interests and/or values due to people coming from different
background; lack of knowledge about means-ends relationships due to
inexperience in the organization and internal environmental turbulence vis a vis
relationship with the external environment in the Government and Ministries.
Each new project organization looks toward the leader who could give direction
and structure the organization in a way that reduces the internal turbulence by
creating a balance with the external environment and yet achieves the
organizational objectives.
All major infrastructure projects in India, including Delhi Metro, Kolkata Metro
and Konkan Railway were sanctioned after prolonged studies and several
feasibility reports. Such studies were carried out by the existing government
bureaucracy and even the consultants were not sure at the time of preparation of
the report whether the project would actually get started. Hence, once the project
is sanctioned the Leader of the organization which is going to implement it should
be allowed to review the Detailed Project Report (DPR) of the project so that the
failure of the project should not be blamed on the DPR at all. Right from
identification of a project till commissioning of railway line there are several
28
layers of planning and coordination which are not directly under the control of a
CAO. Hence such review is not possible in Construction units, but certainly it is
possible to some extent in RVNL.
If we look at the construction organizations in the IR, CAO is the leader. Let us
analyze his position, power and responsibility. The CAO doesn’t have a fixed
tenure and on an average an officer may work as the CAO of a particular
construction unit for two years. He works at the pleasure of Member Engineering,
who is the member-in-charge in the Railway Board for all railway projects.
However for all administrative purposes he works under GM of the zonal railway.
This is typical example of a matrix structure where dual control exists over CAO.
Generally during the construction life of a project several CAOs might head the
construction unit. No major project could be identified with one CAO except
smaller projects that might have a short construction life. A CAO’s performance
is judged in a comparative sense vis a vis his predecessor’s. In true sense a CAO
is more of a bureaucratic head than a leader.
Many people question why Dr. Sreedharan wasn’t so successful while he was
serving IR where he reached the top position of Member Engineering in the
Railway Board before he took the reins of Konkan Railway Corporation (KRCL)
as Chairman and Managing Director. Dr. Sreedharan continued with the KRCL
till the project was almost complete. Both KRCL and DMRC projects were
identified with one leader till the project was complete. In both the organizations
Dr. Sreedharan was among the first employees joining the new SPV. He obtained
complete freedom, as a pre-condition of joining the organization, to select his own
team of functional Directors and other senior officials, creating his own
management control rather than copying the existing models. It is interesting to
note that the Chairman and Managing Director’s post now stands removed from
KRCL and Member Engineering, Railway Board is the ex-officio Chairman of the
SPV. Dr. Sreedharan further got the liberty of reviewing the DPR in DMRC
which resulted in identification of better corridors, adoption of different
contracting framework and selection of latest technology for implementation of
29
the project. For the purpose of providing a glimpse of the result of such reviews
the contract packaging in DPR and that adopted by DMRC for u/g metro corridor
is shown in the Exhibit-6.
Exhibit-6
DPR Stage Actually Adopted by DMRC
• 10 Civil Structure Contracts.
• Construct Only.
• Tender Documents are prepared on the basis of traditional multi-contract implementation Strategy
• Several E&M Contracts
• Several Ventilation/AC Contracts
• Two Contract MC1A & 1B.
• Design & Construct
• The Packaging is done based on proposed method of construction i.e.(Cut & Cover vs Tunnel Boring)
• Civil Engg. Electrical & Mechanical, Lighting(AC & Ventilation) all combined.
Compare this with RVNL, where during the last five years of existence of the
organization, two MDs were posted. Further the MD didn’t get the freedom in
selection of either functional Directors or other senior officers, who are actually
selected by Public Enterprise Selection Board and the Railway Board
respectively. Within the Railway Board too, officers from different departments
are selected by the respective Members of the Board. MD has full freedom in
matters relating to how the project is going to be executed but not in matters
relating to the creation of organizational structure, work culture, procedures,
financing, long term Concessioning or maintenance of the project etc. The Board
of Directors of the company is mostly guided by the Railway Board’s policy or
the existing policies in other railway PSUs in respect of company matters and
Chairman22 and part time government Directors have upper hand in these
matters.
In order to know how Dr. Sreedharan used his leadership to create new
organizational structure and work culture in KRCL and DMRC, let us look at his
dynamic style of management listed out in following points23:
30
• a unique corporate mission and culture with the sole thrust on creating a
world class metro
• fast track decision making process
• discouraged paper work and relied more on meetings for decision making
• ample delegation of power-accountability with power
• redefined the role of finance- made it equally accountable along with the
executive for project’s success
• kept himself constantly in touch with officers and staff-sets an example
himself
• fear of audit and vigilance not allowed to cramp the executive’s working
• led from the front and not pushing from the rear
• no political or bureaucratic interference allowed in decision making
• reviewed the DPR and made the corridors more people friendly and
changed the contract packaging to his choice
• built a slim but effective officer oriented organization eliminating
ineffective layers such as clerks, peons, and assistants
• selected officers of his choice preferably outside from Delhi who came not
for being in Delhi but for performing
• screened even railway officers posted in GC
• placed high premium for integrity- officers with doubt sent back to their
parent cadres overnight
• field staff irrespective of rank wore uniforms and protective gear
• discouraged witch hunting for genuine mistakes-owned the mistaken
decisions of officers
Success of any project depends largely on the success of contractors deployed.
But there are always disputes between the authority and contractor on various
31
matters. In such cases, the MD of a project SPV must be seen by the contractor as
a neutral adjudicator rather than a party to the dispute. Contractor must be assured
of fair deal in the form of appeals at higher levels for any grievance. MD, DMRC
had positioned himself as a neutral and highest appellate authority and each
contractor had full faith in him. MD used to have periodic review meetings with
the senior management representatives of the constituent firms of the Contractor.
He also used to meet the Project Director of GC and heads of other consulting
firms periodically to address their concerns and at the same time impress upon
them the need for better mobilization at site for achieving the progress. This is the
reason that most of the contractual disputes were resolved through reconciliations
and only few arbitration proceedings were initiated.
Organizational Structure and Work Culture
Anthony and Young, 2002, state that management control function of non-profit
organizations is affected by external and internal environment. A project
organization’s ownership greatly determines this external environment. The
external environment of a CAO’s unit is determined by its relationship with the
Open Line organization of the IR. RVNL being a fully owned GOI SPV under the
MOR, its relationship with the Ministry and the Open Line is different from that
of a CAO’s unit. DMRC being a 50-50 joint venture between Delhi Government
and GOI (under Ministry of Urban Development) its external environment is
totally different than that of RVNL. Flexibility and independence that DMRC and
its MD enjoy could be attributed to a great extent to its typical positioning in
which neither the State Government’s bureaucracy nor the Central Government’s
bureaucracy could significantly influence its internal environment. KRCL is also
a joint venture of the governments of the four beneficiary states of the Project and
the GOI, however state Governments jointly owned only 49% of the shares
whereas GOI owned 51%. This is the reason why KRCL is completely under the
control of MOR and state governments have only nominal say in its affairs. If we
compare the organizational positioning of the above three SPVs, DMRC is the
best placed followed by KRCL and RVNL in that order.
32
Zonal Railway’s Open Line organization’s prime responsibility is to operate and
maintain the railway system and carry passengers, goods and parcels safely and
efficiently. That is the prime reason for creation of dedicated Construction units
for faster project execution. The organization has the same departmental hierarchy
as prevalent in Open Line. But as the Construction unit is under one head, CAO, it
is a cohesive multidisciplinary unit having common objective of executing
projects faster. It has a leaner organization and as described in para 2 a better
work culture than the Open Line. In terms of Harrison and Lock, 2004, the
organizational structure is more like project matrix24. The unit doesn’t have any
freedom of hiring staff, selecting officers, arranging trainings or giving
promotions. These units being temporary project units, all the posts are temporary
in nature and charged to project estimates hence the staff and officers work under
their Open Line cadres without having any prospect of any higher service benefits
on account of performance. Senior officers work for uncertain tenures in these
units as their transfer and postings are controlled by either the Open Line or
Railway Board by the respective departments. The departmental culture is visible
even in the contracting system as each department under the CAO does its own
contracts for separate elements of the project. This perpetuates the
departmentalism further and the opportunity of reaping the benefit of a real
multidisciplinary team is lost. There are many projects where civil engineering
element has been completed but S&T or Electrification elements are not complete
due to either contract not awarded or failure of the contractor. Vice versa also
occurs in other railway projects. If a contractor fails to perform, the CAO has to
follow the government and Central Vigilance Commission rules for hiring another
contractor that is focused more on process rather than timely project completion.
However the biggest visible value addition is in the functioning of finance
department, which in CAO’s unit has joint responsibility and ownership in the
project’s success thus facilitating speedier decision making.
RVNL has a comparatively much leaner organization than the CAO’s unit and has
a corporate structure. It has a staff strength of 350 which is way below the staff
strength (2018) of CAO/ Chennai whereas its project expenditure in 2007-08 of
33
Rs. 1422 crore was much higher than the CAO’s expenditure of Rs. 899 crore.
But the departmental segregation of IR is still visible. Functional Directors:
Director Project, Director Operation, Director Personnel and Director Finance are
all representing their respective departments: Civil Engineering, Traffic,
Personnel and Finance respectively. As against this, DMRC’s organizational
structure to some extent has demolished the departmental culture of Railways.
The functional Directors in DMRC are: Dir Project & Planning, Dir Works, Dir
Operation, Dir Electrical, Dir Rolling Stock and Director Finance. The present
incumbent on Director Operation is an S&T officer from IR whereas Dir Finance
is a non-Railway officer. In spite of a larger and older organization than RVNL,
DMRC is still a flat organization with no intermediate layer between Dir and
CPM, whereas such a layer now exists in RVNL.
There is much better work culture, empowerment and tender practices in RVNL
than those in Construction units. GM of a zonal railway has the power to accept a
tender for work costing Rs. 100 crore whereas MD RVNL has unlimited powers.
CPM of the RVNL has Rs. 15 crore open tender power. Stores procurement in
Construction organization is through Stores department of Open Line whereas a
CPM could procure stores up to Rs. 10 lakh through quotation which is a much
faster process. All tenders are invited on two packet system with separate
technical and financial bids as against one packet system in practice on
Construction units. Good contractors are attracted to work in RVNL as they get
faster payment and have to deal with leaner project team and neutral PMC.
With the passage of time RVNL is becoming more bureaucratic and procedure
oriented. In this process it has a danger of coming closer to the Construction units.
With many railway projects to execute, project execution might just become a
routine work rather than a mission. Some examples cited by CPM Chennai in his
interview are: earlier field units in RVNL were empowered to go for single and
special limited tenders but now they could call only open tenders; earlier one
combined contract used to be awarded for Engineering, S&T, and Electrical
works for a project, but now with the increase in number of officers from S&T
34
and Electrical departments in RVNL there is increased demand for separate
contracts for each discipline on the same project. There is a genuine chance that in
near future RVNL may completely stop calling one composite tender for a
railway project.
Biggest change witnessed in the work culture of DMRC vis a vis IR and RVNL is
the demolishing of departmental culture. This was possible through the use of
following:
• Use of multi discipline composite contracts like MC1A and MC1B;
• Reducing the number of departmental hierarchy up to the top to only
three: Civil engineering, Electrical engineering and Finance;
• Making operation as a general cadre, which officers from any
department can join;
• Filling the top finance posts (Director and GM) from outside Railways.
DMRC’s corporate culture25 has following important expressions that reflect its
organizational structure and culture:
• The Organization must be lean but effective;
• Our construction activities should not inconvenience or endanger public
life nor should lead to ecological or environmental degradation;
• The Corporation must project an image of efficiency, transparency,
courtesy and “we mean business” attitude;
• Our staff should be smartly dressed, punctual, polite and helpful to the
customers;
• Employees should discharge their responsibilities with pride, perfection
and dignity.
In contrast to above the Corporate Vision, the Corporate Mission and the
Corporate Objectives of RVNL26 contains just one sentence toward its
35
organizational structure and culture: ‘To maintain a cost effective organizational
set up’. Lot of lessons should be learned from DMRC, which established a work
culture to which every engineer now wants to be a part of.
Project Management Consultant
Project management consultant (PMC) is nowadays an essential element in any
infrastructure project. It is widely in use in highway sector and gradually being
adopted in other sectors. There is no such practice existing on IR and there is an
acute shortage of officers up to Junior Administrative Grade and supervisory staff,
whereas number of sanctioned and ongoing projects is increasing year after year.
There is also increasing need for packaging bigger and multi-departmental
contracts, as described hereabove, in order to avoid multiple numbers of contracts
on the same project. This has increased the burden of supervision, planning,
procurement, tendering, measurement, billing, progress reporting, quality and
safety monitoring in the Construction organization. At present, CAO’s unit has to
carry out all these roles departmentally without any assistance from any
consultant. As it predominantly awards Item Rate Contract, its supervisory force
is mostly pre-occupied with measurement and billing with hardly any time left for
expediting progress, checking safety or controlling quality at site.
There are broadly two types of project consultancy practices existing in India. The
first one is contract specific PMC that is being used in highway projects. RVNL is
also using this type of PMC. Success of RVNL in achieving higher productivity
with lesser number of railway staff has been largely due to such PMCs. PMC
assists the RVNL in progress reporting, safety and quality monitoring, and
measurement and billing. Adoption of contract specific PMC on the Construction
units would mean a large number of PMCs, which will become unmanageable.
The second type of PMC is project specific, where one PMC is appointed for all
the contracts on the project. This type of PMC, also known as general consultant,
was used in DMRC. This practice is useful only when the Organization has been
specifically created to execute one large project. General Consultant of DMRC
36
played a crucial role in reviewing the DPR, designing the Systemwide contracting
framework, managing the international biddings, developing the contract
management system and monitoring framework, and bringing in and dissipating
international expertise in India for the phase-I of the Delhi Metro project. It is the
acknowledgement of this key role played by GC in its success that DMRC has
awarded the general consultancy for the phase-II also to the same consortium.
Acknowledging the role of PMC, Railway Board has constituted a committee of
senior officers for suggesting a PMC model suitable for CAO’s unit and
developing model tender document for its selection. CAO’s unit handles many
railway projects of varying sizes simultaneously and there are more than one
contract for a project. Hence neither the contract specific nor the project specific
PMC would be suitable. Hence a new model has to be designed as hybrid between
the two. A new organization specific PMC is being devised for construction
organization, in which one PMC would be there under each CAO, working across
many contracts and projects.
Contracting Framework
Contracting is the mechanism through which an organization approaches the
construction market and hires a contractor for executing a project or part of a
project. There are various types of contracts and various ways of selecting a
contractor. The choice of contracting depends on the objective of the project
authority which could be any or a combination of following:
• Faster Construction
• Smaller number of Interfaces
• Less Intensive Supervision
• Project Financing or part funding of project
• Lower Life Cycle Cost
• Superior Asset Reliability
37
• Less Frequent Maintenance
• Lower Maintenance Duration
Based on the degree of risk allocation to the contractor, contract structures could
be classified as shown in Exhibit-7.
Item Rate Contract
Build to Design Contract
Design and Build Contract
Design, Build and Finance Contract
Design, Build, Finance and Maintain Contract
Increasing Degree of Risk allocation to Contractor
Exhibit-7
Project authority’s supervision, planning, monitoring, coordinating and
interfacing efforts reduces as the risk allocation to contractor increases.
Item rate contract is the oldest form of government contracting in India in which
tender is based on percentage above or below quote by bidders on a pre-drafted
schedule of rates for various basic elements like various types of earthwork,
various types of concreting, numerable building fittings etc. Contractor does work
as per the direction and drawing of the government authority and payment is
made on the basis of quantity of each item of work so executed by the contractor.
Scope of contract is defined only in terms of name and approximate value of
work. Build to design is a contract in which tender is invited for rates of specific
work which is already defined and designed, such as standard unit of residential
unit, each girder/ column/ pile of a viaduct, each ton of steel girder etc. In design
and build contract the designing responsibility also lies with the contractor and
tender is either on a lump sum cost basis or per unit floor area, per meter of span
of bridge, per unit length of tunnel etc. Payments to the contractor in ‘Build to
Design’ and ‘Design and Build’ contracts should be made on milestone basis such
as completion of certain percentage of floor, wall, roof, completion of work etc.,
which avoids the tedious work of measuring each element of work. Other two
38
contract structures involve additional responsibility on the contractor for
financing and maintaining the project assets as the case may be.
Construction units on IR generally use the age old Item Rate contract. Tenders are
called even before design begins. This is the reason the contracts are smaller in
size, ill planned and each technical department does its own contracting as they
have different schedules of items. RVNL has freedom in selecting contract size
and type. Usually bigger and multi discipline contracts are awarded by it. But they
also follow same item rate contracting mode as is being done by the Construction
units. However DMRC has gone for judicious selection of contracting structures
based on certain specific objectives:
• ‘Item Rate’ for site preparation and miscellaneous works, where work is
not defined in advance.
• ‘Build to Design’ for elevated corridors where standard design of girders
are being used.
• ‘Design and Build’ for the first two under ground metro contracts MC1A
and MC1B.
• Subsequent underground metro contracts of Phase-I on ‘Build to Design’
• Under ground contracts in phase-II on ‘Design and Build’
• ‘Design, Build, Finance, and Operate’ Concession for Airport Line
excluding civil structure, which is being done on ‘Design and Build’
contract.
Let us analyze DMRC’s strategy in contract selection for under ground metro
corridors. It adopted Design and Build contract for MC1A and MC1B contracts to
place the design risk on the contractor due to lack of experience in handling
tunnel design separately. However after the experience of MC1A and MC1B
contracts, DMRC gained the required experience and it went for Build to Design
contracts in subsequent contracts in Phase-I. However in the second phase in
order to meet the deadline of commonwealth games in 2010, volumes of work and
39
hence number of contracts increased hence it again adopted Design and Build
contract for reducing its own supervision work load. It adopted PPP
Concessioning for Airport Line in order to put the commercial and operational
risk on the private concessionaire and went to build the civil infrastructure, where
it had enough experience, with its own money. Even with Design and Construct
Lump Sum Contract it used provisional sums for paying for uncertain items of
work such as architectural finishes, utility diversions, art works etc. Risks on
these were better managed by DMRC so the contractor was allowed payment on
actual basis with certain percentage mark up for its overhead and only indicative
costs were provided in the contracts against each of these items.
Responsibility Triangles
Any mega infrastructure project’s success depends on three most important
stakeholders: project authority, contractor and PMC. They have already been
described in previous paras. But another important management control element
is the allocation of responsibility of project management among the three. This
relationship could be explained in terms of Responsibility Triangles for CAO’s
unit, RVNL and DMRC as shown in Exhibit-8.
PMC
AuthorityAuthority
PMC
Design Consultants
Contractor
CAO
Contractor
RVNL
Authority
Contractor
Exhibit-8
DMRC
The existing CAO’s unit doesn’t have a PMC, however in technically complex
projects there are design consultants who prepare design for the project and plays
a minor role of managing design changes during project execution. The contractor
has minimum responsibility of project management and this is entirely borne by
the authority. Existing system doesn’t make the contractor responsible for any
40
poor quality work or errors in measurement after the work has been paid by the
concerned authorities. The engineers and supervisors are liable for such
deficiencies and they are under constant threat of vigilance and audit for the same.
RVNL has allotted the responsibility of billing, measurement, quality, safety and
progress reporting on the PMC. Hence all its project management responsibility is
equally shared with PMC. However contractor’s responsibility is almost left
unaltered as compared to the CAO’s model. But the biggest concern in this model
is lack of deterrence against wrong measurement, sub-standard work and unsafe
practices by the PMC staff. The PMC contract value is hardly 2 to 3 % of the
project cost, hence its security deposit (maximum @10%) is barely 0.2 to 0.3% of
the project cost. With this meager deterrence, the problem of accountability &
rent seeking among PMC personnel cannot be tackled.
DMRC adopted an ideal model in which it allotted the responsibility of project
management equally among the three stakeholders as following:
Project Authority
• Payment, Variations and other contract management issues
• Planning, procurement and tendering
• Overall responsibility
Contractor • Contractor’s own Safety and Quality monitoring
• Monthly Progress Reporting
• Measurement and Billing
PMC • Safety and Quality monitoring
• Parallel Progress Reporting
• Checking of measurement and bills
• Assist Client in planning
In this model, the contractor is required to have its own system and organization
for safety and quality management. Progress reporting, measurement and billing
are also carried out by the contractor, who is primarily responsible for these
41
activities. At the same time, PMC would be counter checking all these activities
including submissions of contractor. By this arrangement, contractor’s
responsibility increases, for which he is properly incentivized by quick release of
70% of billed amount (within 3 days of submission of bill). The facility of quick
payment is withdrawn in case of detection of fraudulent or over billing. This
ensured proper discharge of the responsibility by the contractor and at the same
time left the DMRC with energy and resources that was applied in coordination
with local authorities, addressing the concerns of public and arranging prompt
land acquisition to facilitate the successful project execution.
A government construction organization consists of three important structural
elements: Leader, System and Individual; who share among them the risks of
misjudgement in award of contract, poor quality of work, error in payment to
contractor, and physical progress at site. It will be interesting to see how the
responsibility triangle looks like among these three: CAO’s unit, RVNL and
DMRC (Exhibit-9).
DMRC
Individual Individual
Leader Leader
CAO System
RVNL
Leader
System
Individual
System
Exhibit-9
CAO’s unit is functioning mostly on individual’s responsibility and accountability
in all the above mentioned risk elements. The leader has hardly any accountability
for any of these except in individual capacity when he is accepting the tenders.
There is hardly any credible system for ensuring these aspects on the project.
Even in cases where a tender is examined by a tender committee, individual
tender committee member is responsible for any misjudgement. Hence the
individuals behave in a way that would safeguard him from any future vigilance
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cases and organization’s objective takes a back seat in his mind. At RVNL, due to
an improved system and greater power and flexibility given to the leader, the
responsibility triangle is a balanced one. However in case of DMRC, the system is
more robust and the Leader takes maximum responsibility, even owning the
mistakes done by an employee during course of honest discharge of duty. Fear of
vigilance is never allowed to restrict the ingenuity and initiative of an employee in
DMRC. Hence the organization delivers much better.
Monitoring System
Common practice in project management in Government sector is resource
efficiency, i.e. the cheapest cost. But this leads to stretching of project resulting in
delays that causes more cost. Current trend in modern project management
practices is to pursue time efficiency which reduces the cost of tied up money,
avoids cost overruns, and gets early revenues and higher returns. Time efficiency
could be achieved only with an effective monitoring and buffer management
system. The project monitoring system should be able to provide timely warning
of the project slippages from its schedule, have reserve resources and alternative
solutions to enable the project authority and the contractor to take suitable
remedial measures to recover the lost ground. Hence each project contract should
be structured with a series of key dates in such a manner that it provides spare
time, known as buffer, to the authority at strategic locations. Exhibit-10 shows a
typical infrastructure project having three contracts linked together.
Buffer
Critical Chain = L Buffer = L/2
KD 6
Chain -1
Chain - 2
KD 1 KD 2 KD 3
KD 4
KD 5
Exhibit-10
Commissioning
43
KD1, KD2 etc. are the intermediate key dates for a contract represented by the
horizontal bar which is the critical chain in the project network. The two inclined
bars represent two other contracts that are joining the horizontal bar at KD4 and
KD5 respectively. These two contracts would also have similar key dates, which
are not shown in the exhibit for keeping the diagram simple, with the completion
date or an intermediate key date matching with the KD4 and KD5. In order to
have an effective buffer management for each contract, a buffer equal to one third
to half the length of the chain (contract completion duration) should be kept. If the
loss of the three buffers, represented by slippage in each key date, is monitored
and timely corrective measures are taken commissioning could be achieved in
time or before time.
Exhibit-11 shows the list of important Key Dates of MC1A contract whose
description has been presented earlier in the paper.
Exhibit-11
Key Date Description of Key Date
KD1
KD5
KD8A
KD8B
KD8C
KD9
KD10
KD11
KD12
Preliminary Design 14 Weeks
Definitive Design 39 Weeks
Hand Equipment Rooms to SYS01 & SYS02-113 Weeks
Hand Concourse to SYS04 –155 Weeks (70%), station complete
Handover Basic Structure to SYS 05-120 Week
Hand Track way to SYS 03 – 120 Weeks (54%), tunnel complete
Power on to Station/Tunnels – 186 Weeks
Handover for Integrated Testing-193 Weeks
Completion of Works – 218 Weeks
In the above exhibit, SYS01, SYS02, SYS03, SYS04 and SYS05, are Systemwide
contracts for signaling and telecommunication, over head power, track, fare
collection, and escalators and lifts. They are called Systemwide contracts because
they are common for all corridors and they interface with every civil contract.
Each of them represents a specific technology which should be common for the
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entire system of the metro. These SYS contracts interface with the MC1A
contract at KD8A, KD8B, KD8C and KD9. These are not the completion but the
beginning of field work at site by the respective contractors. In this project
commissioning of MC1A contract (KD12) coincides with certain other key dates
of each of the Systemwide contracts. In order to feel the hidden buffer, let us
compare KD8B with KD12. On KD8B tunnel and all four stations should have
been completed except for architectural finishing. Between KD8B and KD12
there lies 63 weeks (30% of project duration). Whereas the actual work involved
in testing and commissioning was done in one third of this time.
Project monitoring for MC1A contract was carried out at two levels; at corporate
level the project was monitored through Key Dates keeping watch on various
contracts simultaneously. At contract level the project was monitored through
milestone schedules and periodic primavera charts submitted by the contractors.
Contrary to this, project monitoring in the CAO’s unit is overloaded in terms of
taking measurements of work done at site, making payments and arranging
railway supplied materials to the contractors. For a typical new railway line
project rails, concrete sleepers, points and crossings, track fittings, ballast and
such other important constituents are arranged through different sources and most
of them are centralized at Railway Board or Open Line level. Even movement of
these materials up to the site is done through railway system which requires
enormous monitoring and coordination efforts. There is hardly any time or staff
left for monitoring quality and progress of the actual physical works at site. The
departmental staff is ill-trained in modern project management practices and there
is hardly any involvement of professional project management consultants in this
work. Moreover contracts have no intermediate key dates for monitoring the stage
completion of project and the contract has just one date of completion. Penalties
are linked to the delays after the completion date. Hence until the completion date
expires and the project actually gets delayed there is hardly any systematic
mechanism for expediting the work. But in most of the cases the delays cannot be
attributed to the contractor solely as railway fails to meet its own part of
commitments.
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Even RVNL contracts don’t have intermediate Key Dates. There is no concept of
milestone payments hence neither corporate level nor contract level monitoring
framework is available. Still due to the assistance from PMC and committed
availability of funds, projects are completed faster by RVNL as compared to the
performance of CAO’s units.
Buffer Management and System Review
After the intermediate key dates and buffer, the next important element for
achieving project goals is buffer management. The basic input to enable this to
work is the visible implication of a day’s delay to the authority and the contractor,
which must be known to every worker and engineer working on the project. The
implication in the Delhi Metro project phase-I was laid down as following:
• To DMRC
o Each day that the project is delayed, the cost goes up by Rs. 1.4
crore due to inflation and DMRC gets deprived of Rs. 89 lakhs of
net revenue
o Each day saved will benefit the city to the extent of Rs.4.5 crore in
terms of fuel saved & other social benefits
• To MC1A contractor
o 0.005% of contract price every day (Rs. 5 lakh) if a Key Date is
missed but refundable when subsequent Key Date is achieved.
In order to spread the importance of each day and as a constant reminder to
everyone electronic project clocks placed at strategic locations and all offices
continued showing the number of days left to commissioning.
For any infrastructure project, delays are rule rather than exceptions. As soon as a
contract is signed and a schedule is prepared the project starts slipping. Exhibit-2
shows the actual concreting progress during the first few months of concreting,
which is shown below the planned S-curve. Projects seldom go from success to
46
disaster overnight. Most projects are behind schedule from day one. The
important aspect of Management Control System is to get these early warning
signs and required actions should be taken. Let us look at what corrective actions
MC1A contractor took to manage the slippages:
• Revising the construction methodology
• Taking up parallel works by abandoning earlier planned phasing
• Introducing night shift
• Deployment of additional sub-contractors
• Deputing senior management representative during night shift
• Simplifying temporary works using the experience gained at site
With each slipping day, the demand rate of concreting became higher and revised
S-curve became sharper and sharper. DMRC and GC’s project team forced the
contractor to think of new solutions for catching up the progress. The contractor
failed to achieve KD8A and KD9 resulting in levy of penalties for each passing
day. At one point of time the cumulative penalty deducted from contractor’s bills
had become more than Rs. 15 crore. Contractor was forced to decide on higher
resource mobilization in order to save the losses and even get repayment by
achieving next Key Date.
DMRC utilized the buffer kept in testing and commissioning as described above.
It had strategically started the construction on elevated rail corridor between
Shahdara and Tis Hazari, without the project management of GC, quite ahead of
beginning of works in metro corridor. This allowed it to gain experience in testing
and commissioning of various systems, which helped it to target big reduction in
time of this activity on MC1A contract. The project management team negotiated
with the contractors for finding a solution through which a win-win solution could
be achieved for all contractors as well as DMRC. As part of this solution MC1A
contractor was allowed to provide phased access to the SYS contractors; partial
opening of stations was agreed so that the train services could be started with
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minimum amenities; already expired Key Dates were rescheduled as a
compromise for preponing of the final commission date; penalties already
deducted was refunded; and finally DMRC even agreed to offer some cash
incentive for such preponing as a compensation for mobilizing additional
resources. All these buffer management initiatives helped to commission the
MC1A line on 18th December 2004, about seven months in advance of scheduled
date of 25th July 2005.
Buffer management is non-existent in the CAO’s unit due to multiple reasons
such as non-availability of intermediate key dates in the contract, lack of direct
correlation between the delays in completion of project and the losses to railway,
lack of freedom in taking special measures to recover the lost time. As hundreds
of sanctioned project vie for attention and fund, Railway Board’s objective is to
find out which and how many projects could be commissioned in a particular year
against that year’s budget allocation. Hence if a particular project slips, another
one might get higher attention to achieve the annual target of commissioning new
lines and spending the allocated fund.
The existing procedure for contract management in RVNL doesn’t allow the type
of negotiated arrangements for catching up the slippages and preponing of the
contract completion date as seen in DMRC. Further due to multiple project
portfolios and no clear financial implication of delay or preponing there is hardly
need for any such strategic measure.
With the commissioning of a project or a part of the single project, the SPV
leadership should review the elements of the existing management control system
and make necessary changes in it prior to beginning the next project or part of the
single project. Such changes might either be to guard against complacency or to
benefit from the past experience. Such system reviews were inherent in DMRC
and they resulted in decisions such as: which contract type to adopt; whether to
involve GC or carry out project monitoring by own team; whether to involve GC
in selective aspects of the project requiring higher expertise; deploying new field
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units; review of organizational issues etc. As commissioning of various corridors
used to take place once or twice every year, such system reviews were taking
place on almost regular basis. This is one of the important reasons why DMRC is
still delivering projects ahead of scheduled time even in phase-II of the Delhi
metro project in spite of the organization getting older. In case of Construction
units of IR such system review is centralized at the Railway Board level and is
done for all Construction units on IR. At RVNL this is reflected through changes
in schedule of powers, organizational structure and in decision- whether contract
for a new project should be multi-disciplinary or not. As discussed hereabove,
changes in RVNL so far hasn’t helped in faster execution of projects rather it has
made the procedures more cumbersome and organization more bulky. SPV should
be cautious while tightening procedures to check malpractices as it might be
detrimental to the faster execution of projects.
Key findings of the evaluation of the three project organizations studied
hereabove have been summarized in Exhibit-12. This also contains
recommendation for Management Control System for an SPV created for
executing infrastructure projects.
Exhibit-12
Characteristics Construction Unit of IR
RVNL DMRC Suggested for SPV
Leader
Fixed Tenure No 3 years 13 years till year 2010
Not less than 5 years
Authority to review DPR
No No Yes Yes, in order to transfer full accountability for the success of the project on Leader
Freedom to select team
No Limited Maximum Necessary for effectiveness of the Leader
Adjudication for Contractual Dispute
Partly Partly Fully Contractor should see him as a Neutral Adjudicator
Organizational Structure and Work Culture
Positioning of SPV
Tied to Open Line Organization
Tied to MOR and IR Equidistance from GOI and State Government
If JV, 50:50 ownershipbetween GOI and State, otherwise have leader as CMD
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Characteristics Construction Unit of IR
RVNL DMRC Suggested for SPV
Operational Responsibility
No No Yes Desirable for SPV
Size of Organization
Leaner than IR Leaner than Construction Unit
Leaner finance, HR and operation in project phase than RVNL
Project phase must have very lean finance, HR and operation departments
Departmentalism Maximum Lower than Construction units of IR
Minimum Break the departmental structure of the sponsoring Ministry
Layers Flatter than Open Line
Flatter than Construction Units
Flatter than RVNL Heads of field units should directly report to functional directors
Corporate work culture
No Minimal Maximum Should have overt and dominant
Power Delegation
Lower, butincreasing year after year
Higher than Construction Units
Similar to RVNL Liberal power delegation to cutting edge executives ensures accountability.
Project Management Consultant
Availability No Yes, in every project For selected corridors/ contracts
Should be integral part of the control system
Type N.A. Contract specific General Consultant Single Project SPV- General Consultant Multi Project SPV- Contract Specific Construction Units-Organization specific
Contracting Framework
Spectrum of Contract structures
Only Item rate Contract
Only Item Rate Contract
Four contract structures
Should have full spectrum from Item Rate to Design Build Finance and Maintain
Risk allocation mechanism
Only price variation clause
Only price variation clause
Price variation, provisional sum and different contract structures
Should use wide range of options for optimum risk allocation among SPV and contractor
Multi-disciplinary contracts
No Yes, but decreasing trend
Widely used Should use for leaner organization, better work culture and checking departmentalism
Responsibility Triangles
Distribution of project responsibility
No PMC, heavily loaded on project authority
Equally heavily loaded on RVNL and PMC, contractor is lightly loaded
Balanced among the three
Balanced distribution among the three
Distribution of risk of misjudgement
Heavily loaded on individual
Balanced among individual, leader and system
Heavily loaded on system and leader, light on individual
Individual should be safeguarded from the risk of misjudgement
Monitoring System
Intermediate key No No Yes Should be adopted for better
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Characteristics Construction Unit of IR
RVNL DMRC Suggested for SPV
dates project monitoring
System wide contract and buffer planning
No No Yes Necessary for ensuring timely commissioning of complex projects
Levels of monitoring
Only one level, every one monitors same targets
Only one level, every one monitors same targets
Two level monitoring: project level through milestones, and at corporate level through key dates
Two level monitoring: project level through milestones, and at corporate level through key dates
Buffer Management and System Review
Presence No No Yes Should be integral part of control system
Visible implication of a day’s delay
Not known Not known Known across the organization and to all stakeholders
Should be known across the organization and to all stakeholders
Control system review for better project delivery
Centralized at Ministry level, minimal at construction units
System getting more procedure oriented and bureaucratic year by year
Yes, different system for every new project corridor/ contract
Necessary for continual improvement, and check against slackness and danger of tightening procedure to the detriment of progress
Conclusion
The comparative study of project management in Construction organization on
IR, RVNL and DMRC has provided key insights into management control system
for such project organizations. The detailed description of project management of
MC1A contract in DMRC provides answers to questions beginning with ‘What’
or ‘How’ related to the success of project execution by DMRC. Whereas the
comparative study and resulting management control system provide answer to
questions beginning with ‘Why’. Key lessons from this study could be
summarized as following:
• If the SPV is a JV, 50:50 ownership between GOI and State Government
is better otherwise CEO should be CMD.
• The CEO should be the first employee to be appointed to an SPV and he
should be allowed complete freedom in building the organization and
creating a new work culture conducive for faster project execution.
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• The CEO should review the DPR of a project to avoid any loose ends that
could derail the project during execution.
• Departmental structure of the sponsoring department or Ministry should
be broken while building the organization.
• PMC should be an integral part of project management.
• SPV should use a rich contracting framework having range of choices
suitable for strategic selections for achieving project goals.
• Judicious allocation of responsibility among various stakeholders
galvanizes the entire project team.
• System wide contracting network with intermediate key dates and two
level monitoring is necessary for effective monitoring.
• Buffer management should be used to expedite delayed projects and
prepone date of commissioning of project.
• System should be reviewed after experience of each project for continual
improvement and checking slackness.
The Management Control Framework emerging from the case study of DMRC
although do not exactly apply to the Construction units of IR and RVNL, still the
insights obtained from the comparative study is valuable. Lessons so derived can
help in making them and other similar project SPVs more effective, efficient, and
responsive and in creating better project SPVs.
Notes and References
1 Statement by Deputy Chairman, Planning Commission, GOI as published in internet edition of Financial Express dated December 4 2007; down loaded from http://www.financialexpress.com/news/India-must-hike-infra-spend-to-9-of-GDP/246584/ on 30.04.2008. 2 Annual Report 2003-04 of Ministry of Statistics and Program Implementation, as quoted by MD, Delhi Metro Rail Corporation in a presentation at IIM Bangalore in 2004. 3 Budget speech of Minister of Railways while presenting Railway Budget for year 2008-09 4 Gupta, Anil Kumar and Roy, Shyamal, 2008, ‘Public Private Partnership in Railways: A New Approach’, IIMB Management Review, Vol. 20 No.1, pp 6-10. 5 Replied by a retired Chief Secretary in a Public Policy Seminar at IIM Bangalore in year 2004 in response to a question regarding endless trouble several under construction flyovers were causing to public in Bangalore city.
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6 Extracted from a presentation made by MD, DMRC at IIM Bangalore in year 2004. 7 CAO units have started coming up for special projects under other technical departments too. 8 Extended Railway Board consists of Railway Board Members, and representatives from other Central Government Ministries such as Finance Ministry and Planning Commission. It plays the same role as Public Investment Board (PIB) of GOI. 9 The study was based on the Monthly Progress Report sent by the CAO/Southern Railway, Chennai for the period ending 31.03.2008. It contained the March 2008 progress as well as the cumulative progress for the entire financial year 2007-08. 10 It is the aggregate of the differences of latest estimated cost and cumulative expenditure incurred till 31.03.2007 for each project. 11 This is the aggregate of fund allotted to each of theses projects in the Railway Budget 2007-08. 12 Quadrilateral formed by the lines connecting the four metro cities of Delhi, Chennai, Kolkata, and Mumbai. 13 Based on Monthly Progress Report for March 2008 prepared by RVNL for the Railway Board. 14 As per the Annual Financial Statement for year 2006-07 downloaded from www.rvnl.org. 15 Study was done through telephonic interview of Mr. Pradeep Gaur, Chief Project Manager, Chennai on 10th April 2008. 16 Arrived at through interviews of some officers working on RVNL. 17 No such hoarding is erected at any DMRC project site. One can only find a decent full height continuous hoarding bearing ‘Delhi Metro’ and the Contractor’s name. Hoarding is more as a good advertisement for an excellent project site rather than a sorry statement for troubles loaded on public. 18 MCD- Municipal Corporation of Delhi; DJB-Delhi Jal Board; PWD- Public Works Department; NDMC-New Delhi Municipal Corporation; and DDA- Delhi Development Authority. DMRC even took several officers from these authorities on deputation who later took absorption with it. 19 Anthony, Robert N. and Young, David W., 2002, ‘Management Control in Nonprofit Organizations’, McGraw Hill, Part III Management Control Systems, Chapter 8, pp 373-396. 20 Hofstede, Geert, 1981, ‘Management Control of Public and Not-For-Public Activities’, Accounting, Organizations and Society, Vol.6, No.3, pp193-211. 21 Harrison, Fredrick and Lock, Dennis, 2004, ‘Advanced Project Management A structured Approach’, Gower Publishing Ltd., England, pp 12-64. 22 Member Engineering is the ex-officio Chairman of RVNL. 23 Stated by the MD himself in a presentation given at IIM Bangalore in year 2004. 24 Other two forms suggested by Harrison and Lock are functional matrix and balanced matrix. These are the project organizations created in an existing matrix organization. IR is a matrix form of organization. 25 Downloaded from http://www.delhimetrorail.com/corporates/about_us.html on 30.04.2008 26 Downloaded from http://www.rvnl.org/profile06.php , http://www.rvnl.org/profile07.php, and http://www.rvnl.org/profile08.php .
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