Wang Ning, vice minister of Ministry of Housing and Urban-rural Development

 

My comrades,

 

It is my great pleasure to attend this forum and commendation conference. I am inspired by everyone’s excellent job in their workplace, and I am glad that I earned my own commendation. Here, on behalf of the Ministry of Housing and Urban-rural Development, I would like to give my warm congratulations to all rewarded project manager departments and all project managers. I hope you will cherish the honor and keep on working after you return to your workplaces.

 

The theme of this conference is “New Urbanization and Innovation of Construction Development and Project Management”. This theme is well-chosen, since it not only conforms to the essential requirements of national development strategy of new urbanization, but also bodes another developmental opportunity for our construction industry, coming along with urbanization. Based on real situation, we should carry out in-depth research and discussion around this theme; explore ideas for development, and exchange experience regarding innovative project management.

 

Taking this opportunity, I would like to share two personal views with you:

 

To begin with, in spite of the great progress made in construction industry, there are still many problems and difficulties. In particular, under the new situation, it is an arduous task to change the development pattern of construction industry.

 

Since the reform and opening-up, China has made rapid progress in the construction industry. The status of construction as a pillar industry in the national economy has been further consolidated and enhanced.

 

Firstly, industrial scale constantly achieves new heights. In 2012, the qualified construction enterprises had completed nearly 13.5 trillion Yuan of total output, with the value added of the construction sector reaching 6.8% of GDP, ranking 5th among the various industries of the national economy. There are more than 41 million employees evolved in construction industry, which is an important industry absorbing a large amount of surplus rural labor force, boosting national economic development. Its status as a pillar industry has been constantly enhanced.

 

Secondly, technological advances and innovation have achieved great results. Many large enterprises of project investigation and design and many construction enterprises have increased investment in science and technology, and established enterprise technology development centers. Focusing on the study of engineering specifications and technical standards, they have gained significantly increased ability to carry out technical research, to design and to build. A number of remarkable major construction projects have been completed, which are with advanced design concepts, complex structure, high technology, and challenging construction. Certain construction technology has reached the advanced level in the world.

 

Thirdly, the international marketing capability is growing. In 2012, the newly-signed contracts of overseas contracting projects amounted to approximately US$ 150 billion, increased by 10% over the previous year. According to the list of global top 225 international contractors in 2012 published by the American magazine Engineering News Record, there were 52 companies from mainland China shortlisted, showing a good trend of steady growth.

 

Fourthly, reform of construction enterprise is deepened. Governments are actively promoting the reform with the core content of establishing modernized enterprise system, and guiding enterprises’ integration and restructuring. Through reforms, a number of state-owned enterprises have achieved great progress in terms of enterprises’ vitality and competitiveness, and have played a leading role in technology development, project management, and personnel training. At the same time, through a series of reform of property right system, non-governmental construction economy also continues to grow and develop. Private economy has played a significant role in increasing productivity, promoting competition in the market, and accommodating labor force.

 

Fifthly, supervision mechanism has been constantly improved. In recent years, government has published a series of rules, regulations and policies concerning construction market supervision, engineering quality and safety management, standards and quota management, and has gradually enhanced regulation and improved the supervision mechanism.

 

Despite the brilliant achievements in construction industry, there are still a number of deep-seated contradictions and problems.

 

Firstly, construction industry shows woefully inadequate ability for sustainable development. To a large extent, development of construction industry still relies on the rapid growth of fixed-asset investment, with extensive development pattern, backward ways of production, outdated management. Enterprises have always been developing on the low level, since during construction there are huge resource cost and carbon emissions. A lot of enterprises, which are seemingly large in scale and have increasing output each year, are actually pretty weak in technological innovation and management, showing a serious gap between enterprises’ expansion and their management and personnel quality.

 

Secondly, behaviors of market subjects are not regulated. Situations such as construction units violating statutory construction program, dodging tender and false tender, arbitrarily shortening the construction period, maliciously cutting down the prices, and violating the construction mandatory standards and specification are still prevalent. Some situations are more highlighted, such as construction enterprise selling or lending qualifications, bid rigging, colluded bidding, contracting-out, and illegal subcontracting. Accidents occur occasionally due to the lack of implementation of construction parties’ responsibility and insufficient inputs for safe production by some construction enterprises.

 

Thirdly, funds for technology development is commonly limited in construction industry, with nearly no investment from small and medium sized enterprises. Incomplete statistics show that Chinese construction enterprises invest only 0.3%-0.5% of its turnover in technology research and development, showing a large gap with the average 3% even 10% of developed countries. The difference is also obvious in terms of technical contribution, with 25%-35% of Chinese construction industry and about 70% of developed countries.

 

Fourthly, there is an acute shortage of skilled workers in construction enterprise. At present, the amount of practitioners in construction industry in China is up to 41 million, with a substantial proportion being migrant workers, while a very low, yet still declining year by year, percentage being skilled operation staffs. In addition, as many enterprises are experiencing profit landslides in recent years, more labor force are flowing away from construction industry because of poor construction environment and bad welfare. As a result, competition will become more intense due to the sharply increased labor costs.

 

Fifthly, our enterprises are at a disadvantage when compared with foreign countries. There is a big gap in terms of asset size, revenue, labor productivity, and profitability. In 2012, the newly-signed contracts of overseas contracting projects in China amounted to only a small proportion of the global market share, which is out of proportion to the huge army of 40 million people in Chinese construction industry.

 

Generally speaking, the aforementioned situation cannot meet the industry’s needs for sustained development; neither can it meet the needs for enterprise transformation and upgrade, nor the need for quality and safety. To this end, we should further deepen the reform of construction industry, and transform the developmental pattern to achieve sustainable development. Regarding the detailed ways of deepening the reform and changing the way of development, we shall discuss and explore together. It’s a tough question, which we have been pondering upon lately. In my opinion, currently, there are two issues worthy of attention and research: firstly, such changes should be driven by the promotion of enterprise’s technical innovation and progress. Through technological advances, the enterprise’s production and management mode, mode of operation and organizational structure, and services are expected to go through comprehensive changes and achieve significant progress. Secondly, through the transformation of development pattern, it is expected that ultimately, the development pattern of business or industry can shift from extensive to intensive, from low value-added to high value-added, from high-pollution with high energy consumption to energy-saving and emission-reduction. But no matter what changes must be made, it must be made from each single project. And that is why we must strengthen and improve our project management.

 

My second major point is that we should further advance project management and create a good foundation for enterprises to change pattern of development.

 

Specifically, there are four issues to be done：

 

The first issue is to constantly advance and deepen the project management, and realize “the four lifting”. Project is the carrier of the translation where production factors in construction industry are conversed into real productivity. In this sense, project management is basis for transforming the development pattern of construction industry, and promoting the transformation and upgrading of enterprises. Comrades present here all know that the reform of construction in China started from 1983, as a pioneer among various industries. During the nearly 30 years of reform, among the reform of various construction sectors, the reform of management system of construction projects is considered to be more successful, effective, and widely accepted. Its innovation is not only on theory, but also on the practice, which have yielded abundant achievements. It should be said that we have set up a relatively complete set of project management system, and through our exploration in practice, we have built a number of quality projects with significant impacts in the community, and trained a group of excellent project managers.

 

Project management reform is constantly changing in the development process, with different contents and themes in every historical stage, making this reform a process of constant deepening, improving and moving forward. Even today, this reform is still on, rather than stopped. So in this sense, constantly advancing and deepening project management continues to be a long-term task in our industry.

 

Through the implementation of project management, we should strive to achieve “the four lifting”: first, project management level should be lifted. With the economic globalization, the current issue is to instantly bridge our project management system to international project management practice. We do have some leading and influential aspects of project management in the international arena, and our project is recognized by international peers. Some large enterprises’ competitiveness in the international construction market is due to their highly modernized project management. Therefore, I believe the advancement of the project management in the past 30 years have upgraded our management level of construction, and also elevated the status of our construction industry.

 

Second, economic efficiency of enterprises should be lifted. Years of practice has proved that the benefits of project crucially depend on success of management of enterprise, since the increase of the project’s economic efficiency is the core for realizing enterprise’s economic benefit. Through scientific management, optimistic resources allocation, scientific construction organizations, reduction of material waste, and reduction of project cost, many enterprises have significantly increased their efficiency and benefits.

 

Third, enterprise’s technological innovation capability should be lifted. Technological innovation in the construction industry is mostly derived from the construction site and production line. As a result, in the implementation of project management, focus should be put on technological innovation and R&D of construction method, and regular summary should be made with regard to technological innovations at the construction site. Through the form of technical innovation team, important and difficult problems encountered in construction should be consciously addressed and solved; simple and affordable innovations are expected. For technological innovation, enterprises must increase financial input to encourage first-line operatives to actively participate in technological innovation, creating a strong atmosphere at the construction site. There used to be many teams at the site, dealing with technological breakthrough, scientific and technological research, equipment breakthrough, but there are less and less now. Japan sets a good example in this aspect, by using many small construction equipment invented at the construction site, their construction efficiency and quality has been significantly improved.

 

Four, the standards of project’s cultural construction should be lifted. Project culture is an important part of corporate culture. To strengthen the cultural construction of the project at the construction site, “four elements” must be seized: the first element is learning. I hope that every project management department is a learning group. Through activities of building a learning project department, literacy and cultural image will be enhanced. The second element is information. Informationalized management is the only way of project management. Only through the full application of information technology, can integration, modernization and scientification of project management can be stimulated and enhanced, and can enterprises be optimized and upgraded. The third issue is green construction. One of the most important indexes for measuring the overall quality of the project managers lies in the environmental protection at the construction site, voice and dust pollution control, and proper handling of construction waste. The fourth element is honesty. Project management department is the window of enterprise’s brand building. Therefore, they must treat people sincerely, be mindful of credit, and gain trust from all partners.

 

The second issue is to constantly and steadfastly make great efforts for high project quality and safety management at the construction site, so as to build high quality projects. This year has witnessed a nation-wide severe situation of safety construction. According to statistics, until the end of August, there are 349 accidents of municipal housing construction in China, with 434 deaths, and the figures have increased by 7% and 11%, respectively, than the year before. Among these accidents, there are 16 large-scale accidents, which killed 66 people, and the figures have respectively increased by 14% and 29% than that of the last year. Both the numbers of accidents and deaths are on the rise. Incomplete statistics show that during July and August of this year, housing and urban and rural development departments at the provincial and municipal levels have checked more than 16,000 housing and municipal projects, issued more than 9,000 rectification notices, shut down more than 1500 projects for rectification, and renovated a number of construction projects with security risks. On the basis of self-check of various regions, the Ministry of Housing and Urban- rural Development has organized examination groups to focus on the quality and safety of urban mass transit and affordable housing projects, and has issued 24 copies of law enforcement proposals and approximately 2,600 written suggestions. This shows how severe the current safety situation is.

 

I would like to list a few typical examples to illustrate the importance of construction site management. The first example: in a city’s wealth square project, during the concrete pouring process of the 5th floor of the main building, the formwork’s supporting system collapsed, resulting in 8 deaths and 6 injured. The main reasons are: the project manager did not fulfill duties for project safety management; chaos of the safety management at the construction site; unauthorized subtracting of the frame to individuals without supervision; the shelf and frame were built in a rush with no special construction plan and no detailed information about the operation personnel; serious violation of technical code for safety by pouring beam, column, and board together. All the reasons eventually lead to this major accident. Those conducted this is suspected of a crime, and the judicial authority has investigated their criminal responsibility according to law.

 

The second example: during the concrete pouring construction of an underground garage of a residential building in a city, the template collapsed, resulting in 13 people killed and 5 others injured, and direct economic losses of 12.38 million Yuan. The causes of this accident are: rather than fulfilling the responsibility himself, the project manager appointed an unqualified person to take charge of production management at the construction site; unaudited support systems portfolio; no clarification of the formwork supporting and concrete pouring; inadequate supervision and inspection of the construction site. The accident could have been avoided if the relevant personnel had fulfilled the responsibilities. After the accident, relevant personnel have been punished according to the law.

 

The third example: during the decoration stage of a residential building with a 33-story concrete structure of an eco-tourism area in a city, a major construction accident happened with a lift crashed, resulting in 19 deaths and about 18 million Yuan of direct economic losses. The main causes of the accident are: construction project managers and personnel do not have required job qualification, and have woefully inadequate management capabilities. In addition, there is a chaos at the construction site with inadequate safety management regulation, regulations being not implemented, and neglect of safety management in construction process; careless and formalistic inspections of the lift for construction safety check resulted in failure to find major safety problems. The project manager and the owner had been arrested.

 

For the aforementioned three accidents, and other serious quality and safety accidents occurred in the past two years, one of the main reasons is that project managers failed to fulfill their obligations and resulted in inadequate administration. I want to give project managers a suggestion: each of you has to carefully dissect two or three typical cases and analyze the cause of the accident every year, and then you will find the key points of how to ensure quality and safety as project managers. Generally speaking, four points are important: the first one is project managers should be highly aware of the importance of quality and safety management, and you have to regard quality and safety as the top priority of project management; the second one is project managers must fulfill your obligations of quality and safety supervision and checks, carry out regular quality and safety check to timely find hidden problems and solve them, you must personally ask and check key points and key links; the third one is to strengthen the skill training of first line operation staff to improve the quality and safety of their work; the fourth one is to effectively carry out the standardization of construction safety, to improve conditions for project safety, and to improve the ability of accident prevention. As long as project managers can really fulfill their responsibilities, man quality and safety accidents can be effectively avoided.

 

The third issue is to improve the quality of practitioners, especially skills of first-line workers. Today, I will focus on the construction of spare-time school for migrant workers at the construction site, which is the basis of enterprises’ promoting technological progress and guaranteeing quality and safety. Years of practice has proved that the spare-time school of migrant workers is both important means of strengthening the management of construction sites, and effective channels to improve migrant workers’ skills. Incomplete statistics show that in recent years there are 27 provinces (autonomous regions and municipalities) which have carried out the construction of spare-time schools for migrant workers, with more than 90,000 new spare-time schools established and more than 10 million migrant workers trained. After training, more than 2 million certificates have been issued, such as certificate of vocational qualification and certificate of skilled jobs, and this plays an important role in improving migrant workers’ comprehensive quality, promoting the project quality and safety, and maintaining social harmony and stability. Project management departments being awarded today also have their own good methods and practices in terms of building up spare-time schools for migrant workers, which are worth learning and promotion.

 

At the same time, we have to admit that spare-time schools of migrant workers still have many difficulties and problems: uneven development between enterprises, inadequate awareness of many companies, and inadequate motivation of construction. For some enterprises and some project departments, the project has not been started yet. It is understood that due to China’s current separation of management and service, most enterprises do not have their own labor force, and due to the high mobility of migrant workers, some enterprises are not highly motivated to train migrant workers. Even for the enterprises which have built spare-time schools for migrant workers, there are problems of formalism: some spare-time schools of migrant workers only have signs and tables, but no real teaching and substantive work; some enterprises did not formulate rules and regulations concerning the migrant workers training, faculty, management and assessment in the spare-time schools, all what they do is mere formalistic.

 

Several years of practice has proved the importance and meaning of creating the spare-time schools for migrant workers. The top priority at present is to motivate governments, enterprises, and migrant workers themselves through a variety of means. From the perspective of government management sectors, the main task is to do well in overall design, start from aspects as policy-making and qualification management, guide enterprises to strengthen their work of building spare-times schools for migrant workers, and guide enterprises to enhance their training of first-line personnel’s skills; Meanwhile, through implementation of practice qualification or the approach of basing payment on skill levels, the employment threshold of first-line operation workers will be raised, and from another aspect, migrant workers will be guided to actively participate in various trainings. For one thing, during the stage of regulation design, it is worth considering whether it is possible to let the contractor enterprises have their own labor teams, and combine the management sectors and service sectors, so as to fulfill their responsibility of training migrant workers; For another, we also have to study the possibility of making the construction of spare-time schools as one requirement in various appraisals, such as “standardization of site”, and “model site of security and civilization” and “excellent project manager”. In addition, on the policy level, we will work on resolving the funding issues of building spare-time schools for migrant workers, making sure that the fund comes from funds of construction safety and civilized construction measures (not included in the tender bid cost). Comrades from the Construction Market Division and Personnel Division are also present today, and they are working on making personnel qualifications and training as requirements at the stage of qualification access. At the stage of qualification approval, general contractor enterprises are encouraged to bring basic service teams of their own, and to build up training bases to strengthen their training of first-line operation personnel. Germany and Hong Kong have done a good job in this regard, which we should learn from. Before these policies being issued, on the one hand, all project managers should fully take the initiative to make the construction of spare-time schools for migrant works an important part of construction site management, and really build the spare-time schools up from the perspective of ensuring quality and safety, building quality projects, and by providing basic conditions such as space and time. On the other hand, from a project management point of view, they should take measures to guide and supervise the training of migrant workers in school. Before their entry into the industry, migrant workers must be trained on basic skills and safe production.

 

The fourth issue is to promote the development of EPC (Engineer，Procure，Construct), and this is a long-term strategic task. As we all know, EPC is a common international engineering contracting mode, as well as a high-end way of construction. This construction method should be implemented in large projects, since it is helpful for contractor’s coordination and arrangements to effectively control the quality, safety, cost and schedule, to conduct technological innovation, to save investment, to shorten construction time and to improve quality.

 

Objectively speaking, in 2003, China started the implementation of EPC as an important reform measure to transform the development mode of the industry, but the progress is slow. Some departments still do not fully understand this, even restrict the implementation showing a big distance to the international standards and practices and the expectations of the industry. There are many reasons. Firstly, from the institutional mechanism level, the reason mainly lies in the separation of investment subject and construction management, resulting in the gap between investment management and the requirement of development of EPC. Secondly, there are a relatively small number of large enterprises with EPC capabilities and powerful economic and technological strength, particularly in terms of capital operation and financing capabilities, showing a larger gap when compared with the international engineering general contractor. Thirdly, there are a limited number of specialized, exquisite, and dynamic small professional enterprises, but many midsize enterprises with similar business scope, management methods and ability. Fourthly, there is a severe lack of laws and regulations regulating the owner’s behaviors and absence of legal safeguards for contractors’ construction with advance investing, resulting in the lack of financing conditions and increasing financial risks for the contractors.

 

We should appreciate that in recent years, under the condition of unstandardized general contracting market, many enterprises with strategic development vision have promoted the diversification of contracting mode of project construction in our country through the implementation of various construction modes, such as EPC and BOT (build—operate—transfer).

 

Let me cite two examples to illustrate this problem: the first example is about the construction of Shenzhen Metro Line 5 invested by China Railway Group. With a total investment of 20 billion Yuan and covering 40 kilometers, this project is in a set of urban rail transit projects in Shenzhen in support of its hosting of the 2011 World University Games. By taking full advantage of integrated design, construction, and financing, the general contractor started from management and technology innovation, reasonably allocated manpower and resources, saved resources from the headstream, and achieved great economic and social benefits. The second example is about the fourth-ring expressway in Shenyang completed in July this year. Following the BOT mode, it is invested and constructed by China Railway and Shenyang municipal government. It covers 132 kilometers and has a total project cost of about 8.3 billion Yuan. Through excellence quality, technological innovation, safety guarantee, detailed management and other measures, the general contractor realized the overall objectives of the project. I hope that the parties concerned should conscientiously sum up the aforementioned examples and actively promote the method.

 

As you know, the “Twelfth Five Year Plan” period will be a precious opportunity of development for the construction industry in China. The speeding up of the construction of new urbanization provides a new space for construction industry’s development, leading to a steady growth of the total amount of China’s construction industry. Specifically speaking, accelerating urbanization will further increase the demand for infrastructure and housing; the optimization and upgrading of secondary industry will result in high demand of industrial buildings; the initial development of the Eastern regions, the rise of central China, the development of the Western region and the rejuvenation of old industrial bases in Northeast China will form a larger scale for construction development; The construction of new countryside put forward by the Party Central Committee will be the most important potential market. This trend will build a broader platform for us to further promote general contracting. We should seize the opportunity and vigorously promote general contracting.

 

There are three tasks we should pay great attention to for the next step: firstly, we must seriously study the difficulties and problems hindering the development of general contracting, and work on resolving strategies in terms of laws and regulations, policies and measures, demonstration and promotion, and so on. Secondly, general contracting companies should be led to be fully accountable to owners in accordance with the contract, demonstrating the comprehensive quality necessary for general contractors, and to upgrade the capacity of enterprises to carry out general contracting. Thirdly, construction companies should be bold in innovation, actively carry out the exploration and practice of general contracting mode. They should combine the internal demand of China’s adjustment of industrial structure and enterprises’ transformation and upgrading with the promotion of project general contracting, achieve the development goals to the high-end market while guaranteeing investment returns.

 

Finally, I want to give some suggestions regarding the Association’s work and project managers’ study.

 

Since its establishment, the Project Management Committee of China Construction Association has been consistently following the principle of “facing the market, based on enterprise, focusing on research, and emphasizing service”. It has played an essential role in leading project management reform and innovation to fulfill the internationalization objectives. It has been focusing on organizing research and discussion for summarizing and promoting good practice of project management. It has played an important role and made important contributions for advancing project management reform, promoting enterprise transformation and upgrading, training professional project managers, promoting enterprises’ technological progress, and the implementation of the strategy of “going out”. Years of work of the association have been well recognized and accepted by its members. I hope you will keep on working hard. Next, you should make use of the current trend of the national vigorous advance of urbanization and the development of green energy-saving environmental building, fully play the role of experts and research institutions, seriously work on the new situation and new problems encountered in the development of construction industry, and propose countermeasures, so as to provide good service for the transformation and upgrading of construction enterprises; Meanwhile, you have to continue the unique and irreplaceable advantage of the Association, tightly unite and hold together member units for brainstorming and contributing together for the transformation of development mode of construction industry. You also have to improve yourselves, adopt effective measures in training, management, and business development, so as to strive for a better and faster development.

 

I would also like to say something to project managers. Project manager is the heart and soul of project management. You are working in the front line, shouldering great responsibilities with heavy burden. Learning is important for carrying out the project manager’s responsibilities. Therefore, I hope you will always be eager to learn. You should take national excellent project managers and international outstanding project managers as role models. Meanwhile, you should combine learning with practicing, pay attention to the study of solutions of practical problems. For example, regarding practice of domestic project management, attentions should be paid to research on using information technology to achieve multiple-project and interdisciplinary management target, to solve various problems such as optimization of the process of green building; in terms of international market exploration, focus should be put on research of the fusion of Eastern and Western culture, mastery of rules and risk control, resources configuration and management of innovation, and so on. All these difficulties are waiting for us to conquer and solve. All in all, I hope that through your hard learning and effective thinking, you will make greater contribution in your own positions, dedicate more and better quality construction to the community, and accumulate valuable spiritual wealth for the industry.

 

My comrades, the Communist Party’s 18th national congress have drawn the blueprint for us. As the construction of new urbanization is accelerating, the construction industry will usher the spring of reform and development. Our construction industry still has far to go, and our enterprises also share great responsibility. Let us seize the opportunity, meet the challenges and work together for the reform of the construction industry, so as to make new and greater contributions to its development!

 

Thank you all!