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Value and risk Management has been optimized by the Oman government in all the construction sectors. The main aim of integrating value and risk management in construction and also in some professional studies is to achieve the value for money. The Oman project performance is at a better condition, a lot of funds have been issued to take care of the infrastructure and construction projects, in addition there are a number of professional bodies concerned with offering relevant training regarding value and risk management. All these efforts are targeted towards achieving value for money.
2.0 The Quantity surveying profession
Royal Institute of Chartered Surveyors (RICS) defined that a Quantity Surveyor (QS) are the cost managers of construction. They are initially involved with a capital expenditure phase of a building or facility, which is the feasibility, design and the construction phases, but they can also be involved with the extension, refurbishment, maintenance and demolition of a facility. They work in all sectors of the construction industry worldwide. In real estate this covers residential, commercial, industrial, leisure, agricultural and retail facilities. In infrastructure it covers roads railways, waterways, airports, seaports, coastal defences, power generation and utilities. They may also work in process engineering, such as chemical engineering plants or oil rigs. As a quantity surveyor they may be working as a consultant in private practice, for a developer or in the development arm of a major organization (eg retailer, manufacturer, utility company or airport), for a public sector body or for a loss adjuster. On the contracting side they could be working for a major national or international contractor, a local or regional general contractor, for a specialist contractor or sub-contractor, or for a management style contractor. Their work may include the following: preparing feasibility studies or development appraisals, assessing capital and revenue expenditure over the whole life of a facility, advising clients on ways of procuring the project, advising on the setting of budgets, monitoring design development against planned expenditure, conducting value management and engineering exercises, managing and analyzing risk, managing the tendering process, preparing contractual documentation, controlling cost during the construction process, managing the commercial success of a project for a contractor, valuing construction work for interim payments, valuing change, assessing or compiling claims for loss and expense and agreeing final accounts, negotiating with interested parties, giving advice on the avoidance and settlement of disputes(RICS, 2006).
3.0 The Quantity surveying and the Value and Risk management
Quantity surveying refers to a mathematical method which is used in cost estimation, improvement and reproduction in a building construction. Value and risk management has been applied in quantity surveying to take care of various areas of construction, in Oman. These areas include; early cost advice, cost planning, Value engineering, life cycle costing, Bills of quantity, advice on other costs, cost control during construction, Monthly valuations and in final account settlement (Rawlinson, 1999). The integration of risk and value management is aimed at ensuring that value for money is achieved in any construction project. These parameters are discussed below.
The process of value engineering has also benefited from value and risk management. This has been achieved through assessing the viability of construction projects so that the clients can be able to achieve value for money. The clients design and the requirements of the operation, in addition to the future maintenance costs of facilities, have been closely evaluated (Rawlinson, 1999). This has enabled most clients to achieve value for money throughout the entire life cycle of buildings.
In determining the bill of quantities, value and risk management has also been incorporated. This begins right from the drawings of the architects to itemized facilities, plant and labour cost for each building area. In order to facilitate the client from getting tender of the best value, the bill of quantity is sent out for to be tendered.
Risk and value management has also aided in making decisions relating to other costs. The costs involved in construction, may include; survey fees, development costs, furniture fittings and equipment, design and professional costs. Establishment of these costs enables real development cost and identification of financial losses before their occurrence (Alfaro et al., 2006).
Cost control in the process of construction. In the process of construction, it is essential to keep both the monitor cost and the original plan of the cost. This is important as variations of the project are recorded and reports made to keep the client updated. The client is therefore able to make necessary adjustments in the cost overruns, in addition to cost reductions.
Integration of risk and value management in quantity survey as also assisted in monthly valuation. The progress of construction; has been monitored in order to make payments of different stages, to the contractor. The measurement of work is normally done at the site; and it involves monitoring of materials and construction on a regular basis. Thus the monthly expenditures can be determined throughout the project by establishing the initial cash flow projections (Ahmed, 1995).
Lastly, value and risk management has also been used to establish a policy which enhances final account settlement. This has enabled the easy payment negotiations with the contractor; successful completion of signoff work has also been achieved. This has aided in the reduction of unnecessary hustle, thus successful completion of construction projects.
4.0 Professional Bodies Representing Quantity Survey in Oman
The professional bodies that are concerned with quantity survey in Oman include; The Royal Institution of Chartered Surveyors (RICS), the Chartered Institute of Building (CIB), Project Management Institute and the Association for Project Management (APM). These professional bodies are discussed below (Rawlinson, 1999)
The Royal Institution of Chartered Surveyors (RICS), this body is involved in the regulation of property professionals such as those concerned with value and risk management and surveyors. It was founded in London in 1868; it provides education and training standards, protects consumers with strict codes of practice and advises. Currently this body emphasizes on value and risk management; since it is concerned with regulation of property professions, such as facility management and planning and development project.
The Chartered Institute of Building is concerned with provision of information, institute, regional pages and industry to members. It also establishes technical documents that relates to the construction environment. The issues that have been studied in this body include; Building services and Segal, 2011)
The third body is known as the Project Management Institute (PMI). This is concerned with establishment of project management standards. These standards are aimed at describing good practices, globally recognized credentials which meeting project management skills and resource for professional development. The body holds that clear understanding of value and risk management enhances achievement of these values (Alfaro et al., 2006).
The last body which is involved in quantity survey is the Association for Project Management (APM). This institution was founded in1946 in United Kingdom. It has a universal reputation for teaching and research. It also has links with the most successful identities in industry and commerce. This body also recognizes value and risk management.
5.0 Overview of the General Project Performance in Oman
5.10 Trends in the Local Construction and Project markets
The building and project health in Oman is in good condition. Taking into account Oman's low population of only 2.8 million people the level of the construction and development in infrastructure already committed or those are still in construction are impressive. The largest procurer of building services is the public sector, in the sultanate of Oman. In the year 2011, the government of Oman announced its eighth five year plan. This was to run from the year 2011 to the year 2015. The amount of capital envisaged by the Oman government is 79million US dollars; the bulk of this is set aside for construction projects. The chief beneficiary of this fund will be; Transportation, tourism, oil and gas, projects in power generation and housing sectors. The major projects under construction are listed below (Alfaro et al, 2006).
Oman Convection centre; this has a budget of 1billion US dollars; the estimated completion date is late 2015.
Sohar Airport; this has a project budget of 400million US dollars, the date of completion is expected to be in 2014.
Salalah Port expansion; this has a budget of350 US dollars.
Oman's national rail network, the cost is not yet known and the approximated date of completion is2017
Salalah Independent Water and Power Project which has an estimated budget of1billion US dollars.
5.11 The Forms of Security and Contractual Protections Required by the Sponsors Security
The security taken by lenders in Oman is not different from the norm in other jurisdiction. It includes the following; a legal mortgage over the land or site, guarantee from the shareholders of the company and a commercial mortgage which involving the company assets. The employer will require production of the following by the contractor; performance bond in which the person who issued it, has to pay if the contractor fails to meet obligations specified in it and a guarantee by the parent company (Ahmed, 1995.)
The employer will target at transferring the risks; in a way that is cost effective to the contractor involved in the construction project. The funders will also ensure that the transfer facilitates the risk profile of the borrower and the project. This case involves situations in which finances do not reflect in the company's balance sheet as liability.
5.13 Management of Risks
The risks which are involved in construction in Oman are managed the same way as in other jurisdictions. The methods involved in management of risks include; sub-contracting, insurance, subcontracting and reliance on local partners who are familiar with the local conditions.
The major categories of risk that are most probable to be faced by the client may arise from the capital project. These are potentially much more extensive than any additional construction costs. This could include the project risk which is mostly concerned with time and cost: the consequential risk which are the unplanned effects of project underperformance on the client's project; benefits risk are the effects of the project bring about more than the expected benefits; finally the effect on share price which is related to the public perception of the project. (Rawlinson, 1999)
The value management aspect is relevant to the construction sector as it reduces the precise causes of avoidable costs. These redundant costs can result from unnecessary aspects which provide no useful role; those that arise from unnecessary specification due to unreasonably expensive supplies/components); and cost of poor build ability (failure to regard construction repercussion during the design phase of the project. Other costs may arise from avoidable life-cycle cost which regard to the failure to put into consideration the future operational costs; superfluous opportunity cost which is the cost of losing prospective revenue (Arafa, 2010).
Value management techniques can be used in the construction industry in order to deliver the clients project requirements. The use of innovation can have a considerable effect on the overall outcome of the project. Innovative solutions need to be adopted at the earliest possible phase of a project. This is because for the opportunities to add value you must use of manufacturer's standard workings rather than modified products.
5.14 Contractual Provisions covering Material delays to the Project
The provisions which are concerned with extension of time are found in the forms of the international standards contracts and also in the standard conditions of Oman. Allocation of risk profile plays a major role in determining the extent of relief as provided under the contract. The following entitles the contractor to an extension time; Changes of scope generated by the employer, employer acts as the prevention and force majeure events (Segal, 2011).
5.15 Appointing Construction Professionals
In Oman, the tender law is used in the selection and also in the appointment of the construction professionals; this is done by the public authorities. The appointment is usually done under the professional service contracts which are convectional. The most widely used is the white book known as the FIDIC (Client/Consultant Model Services Agreement)
5.16 Value and Management Principles to be adopted
The country seems to have optimized the application of value and risk management in all the aspects of construction. There should be investment in new opportunities within the country; strategies should also be formulated at all the holding levels of the organization (Segal 2011).
In conclusion, value and risk management is well optimized in the Oman government. There are several professional bodies which are concerned with risk and value management. The government has invested so much in construction and infrastructure. The major contribution of value and risk management is that value for money has been achieved.