Summary of Doctoral thesis in Economics: Managment accounting of road and bridge engineering construction cost at civil engineering construction corporation under the ministry of transport

Studying and proposing solutions to improve management accounting of cost of road construction cost at civil engineering construction corporations under the MOT in the context of market economy and international economic integration.

MINISTRY OF EDUCATION AND TRAINING

THUONGMAI UNIVERSITY -

NGUYEN THI THAI AN

MANAGMENT ACCOUNTING OF ROAD AND BRIDGE ENGINEERING CONSTRUCTION COST

AT CIVIL ENGINEERING CONSTRUCTION

CORPORATION UNDER THE MINISTRY OF TRANSPORT

MAJOR: ACCOUNTING CODE: 62.34.03.01

Summary of doctoral thesis in economics

Hanoi, 2018

Scientific instructors

1 Assoc Prof Dr Do Minh Thanh

2 Dr Nguyen Tuan Duy

The thesis is available at :

- the National Library of Vietnam

- the library of THUONGMAI UNIVERSITY

PREFACE

1 Urgency of the thesis topic

Investment in transport infrastructure construction is considered a strategic solution to ensure that the goals of economic development and national defense and security are met

During 2001-2015, there was breakthrough development in Vietnam's transport infrastructure in terms of scale expansion and quality improvement Domestic road and waterway transport routes were upgraded to meet the demand transport which enjoyed the anuual growth rate of above 10% In the Global Competitiveness Report of Transport Infrastructure during 2015–2016” by the World Economic Forum, Vietnam rank at No 67 out of 138 countries (compared to the position of 103/139 in 2010) According to the World Bank, the rapid development of transport infrastructure led to the continuously high annual growth rate of Vietnamese logistic market (at 16%-20%)

The contribution of civil engineering construction corporations is vital to the development of the national transport infrastructure under the Ministry of Transport (MOT) These are leading companies in Vietnam in terms of transport infrastructure construction Thousands of kilometers of transport toad, hundreds of bridges of large and small scale connecting all regions of the countries have been built by engineers and workers at civil engineering construction corporations, which contribute to the national cause of industrialization and international economic integration There are unique and record-breaking works such as Hanoi - Lao Cai express way, Nhat Tan bridge, Hai Van tunnel

In carrying out the resolutions No.59/2011/ND-CP and 189/2013/ND-CP of the government, civil engineering construction corporations have been equitized since 2013 In addition tos opportunies, these corporations are also faced with many challenges To improve competitiveness, they need to find solutions to invest in technological upgrade and renovate the management mindset to utilize resources How to utilize management tools is a matter of utmost important and a regular task for company managers Therefore, the improvement of accounting activities in general and management accounting of engineering construction cost in particular is essential in

providing necessary economic information for company executives to make appropriate and effective decisions

The main tasks of management accounting of engineering construction cost are to collect, handle information about construction cost; supervise cost norms, create cost estimates and to provide and analyze information of engineering construction cost for planning and the decision-making process

The main business field of civil engineering construction corporation is about building roads and bridges of large scale, complicated structure, long construction times and under the influence

of weather elements Each of these transport works has to follow procedures and technical standards issued by the government The selling price is determined prior to construction; therefore, to make profit, construction companies need to apply advanced and appropriate construction measures to control cost factors well and reduce unit price Through studying the reality of management accounting at civil engineering construction corporations, the author chose the following topic

for the doctoral thesis: “Management accounting of road and bridge

engineering construction cost at civil engineering construction corporations under the Ministry of Transport.” The thesis aims to evaluate

the reality and propose solutions to improve management accounting of road and bridge engineering construction cost at civil engineering construction corporations in the context of economic integration

2 Overview of studies about management accounting of engineering construction cost

2.1 Local and international studies

Firstly: studies about management accounting

Studies about management accounting started in the 19 centuries regarding its fuctions, roles, and content Here are a number of representative works:

In Advanced management accounting ((2015, Prentice Hall),

authors Kaplan, Robert S., Alkinson, Anthony studied the establishment and development of management accounting at companies in the following basic contents: role, cost behaviour method, cost allocation according to activity-based costing (ABC) method, construction of cost centers at companies, cost items for the decision-making process;

balanced scorecard method In “The use of management accounting

practices in Malaysia SMES” (2012), Kamilah Ahmad studied the

application of management accounting tools such as: classifying costs, making estimates, evaluating operating efficiency, strategic management accounting in small and medium sized enterprises in Malaysia

There are also studies of author Nguyen Viet (1995) (“Improving

accounting in Vietnam”) and Pham Van Duoc (1997) (“Direction for building content and applying management accounting at Vietnamese companies.” They pointed out differences between management and

financial accounting; analyzed roles, functions, contents of management accounting and application at Vietnamese companies such as: classifying cost, making estimates, analyzing the relation among cost, volume, and profit and also cost fluctuation

In “Direction for building the report system of management

accounting and applying it in Vietnamese companies”, author Pham

Quang clarified the theoretical framework of building the report system

of management accounting at Vietnamese companies including the list of

reports, purpose, function, structure and report methods In “Building

management accounting at Vietnamese production companies”(2008),

author Huynh Loi contributed to systemizing basic issues of management accounting such as: the role of management accounting at companies, model and application mechanism of management accounting model in

all forms of production companies of different scales In “Improving

management accounting at construction corporations under the Ministry

of Defence” (2016), author Do Thi Thu Hang systemized theoretical

issues about management accounting at construction companies and from that provided solutions to improve cost management, including the proposal of using modern costing methods

There are also studies about specific industries such as: textile (Duong Thi Mai Ha Tram - 2004), and post and telecommunications (Nguy Thu Hien - 2012) They focused on specific issues of management accounting that are applied to specialized companies All studies concluded that the role of information provision of management accounting were not brought into full play Also, information provided

by management accounting was not given enough consideration and investment All authors pointed out the role and function of management accounting regarding information provision for managers

Secondly: studies about cost management accounting at companies in general

Studies about management accounting can be divided into the following phases:

Phase 1 - before the 20th century: this is the establishment period

of management accounting Management accounting applied analysis method of ratios and financial indicators to help managers manage business and production activities

Phase 2 - early 20th century to before 1970: break-even analysis and cost analysis methods were created for management accounting to control cost

Phase 3 - during the 1970s: management accounting was based

on quantitative information to analyze cost information and behaviour; from that desired profit was determined to help management control cost and make decisions

Phase 4 - from the 1980s until now: management accounting was combined with strategic management to establish management methods such as: target cost, activity-based management accounting, balance scoreboard

The establishment and development of management accounting and cost management accounting are divided into four different period

It can be seem that cost management accounting started to be created in the second phase and begun to develop strongly in the 4th phase in line with modern management methods Cost management accounting is the combination of financial accounting and management accounting There are many foreign authors who studied about cost management accounting in enterprises, such as:

In “Activity Based costing in New Zealand” (2005), Sarah Moll

looked into information and superiority of ABC method This study also pointed out the difference between companies applying this method and those not regarding the advantages of ABC

In “Activity-Based costing in supply chain cost management

decision support systems” (2011), Amir H.Khataie studied and

developed the ABC method for business and production cost; according

to this, production cost is controlled and analyzed in the implementation process of each order

In “Cost Accounting: Traditions and Innovations (1998),

Barfield, Raiborn & Kinney studied and pointed out the differences between the two costing method: the ABC method applies criteria for allocating operating cost into cost objects based on the activities of cost objects; meanwhile in traditional costing method, cost allocation is done based on output volume or labor cost without relation to loss cost of cost objects

In “Cost management: Accounting and Control” (1997),

Hanson&Moowen pointed out the accounting content of responsibility centers for executives in an organization The system of responsibility accounting is established to promote goals among executives

An article titled “Japanese Cost Accounting Systems - analysis of

the cost accounting systems of the Japanese cost accounting standard” (MPRA Paper No 17117, posted T September 2009 15:28 UTC) by

Winter Peter provided an in-depth study into cost accounting in Japan and from that systemized the Japanese system of standard cost accounting as well as compared the Japanese standard cost accounting system with the accounting systems in Germany and the U.S

Locally, there have been many studies about cost management accounting since 2000, specifically:

In the study named “Building the model of cost management

accounting at Vietnamese pharmaceutical production companies”

(2007), Pham Thi Thu Thuy provided a comprehensive overview about cost management accounting and application possibility for Vietnamese pharmaceutical companies; then proposed a model to improve cost control via classifying cost, making cost estimates, analyzing cost fluctuation, identifying each production lot’s appropriate scale, and evaluating the detailed performance according to each product, production unit and distribution branch

With the study titled “Organizing management accounting of

transport cost in Vietnamese road transportation companies”, Nguyen

Thi Ngoc Lan (2012) provided an in-depth analysis of cost management accounting in a specific field: goods transportation That author proposed two methods of classifying cost (by the ABC method and cost behavior) and recommended the ABC method to help transport companies control cost better and have more accurate cost information

In “Improving management accounting of transport cost at

Vietnamese railway transportation companies in the context of international economic integration” (2012), Vu Thi Kim Anh studied

and systemized basic theoretical issues and practical situation of cost management accounting at Vietnamese railway transportation companies in the context of international economic integration That author proposed recommendations to improve contents of cost management accounting in these companies, including: building the system of norms to control cost, classifying transport cost, building the system of norms, and cost estimates; providing transport costing methods; analyzing and evaluating cost implementation information to assist cost control and assess the responsibilities of management levels

in railway transportation companies

The contents of cost management accounting are also studied in specific fields, such as: in plastic industry by Nguyen Thi Mai Anh (2014), steel industry by Dao Thuy Ha (2015) [9], sugar cane industry

by Le Thi Minh Hue (2016), cement industry by Tran Thi Thu Huong (2014), and medical industry by Vu Thi Thanh Thuy

Thirdly: studies of management accounting of engineering construction cost at engineering construction companies

In a study named “Cost accounting methods for construction

projects in North- West Russia” (2009), Jouni Keisala looked into the

superiority of ABC method, which includes all cost incurred in the accounting period (production cost, cost of sales and management cost) and allocated based on actual level for each activity and contribution to each activity during the production and distribution process Accordingly, the application of ABC method brings about more accurate results

In a study named “A costing system for the construction industry

in Southern Africa” (2015), Evans Mushonga analyzed the

shortcomings of the traditional costing method in calculating construction unit price in South Africa That author believed that the application of ABC method would help companies identify accurately component indirect costs of the construction unit price The application

of ABC method in costing was believed to be the key for the making process of enterprises and the analysis of profit from construction contract That author also proposed that companies should apply both traditional and ABC methods at the same time The

decision-traditional costing method has the principle role of providing information for people outside the companies while the ABC costing method focuses on providing information for executives in deciding bidding prices and making estimates for engineering construction cost

Nguyen La Soa (2016) presented a study named "Improving cost

management accounting at Civil Engineering Construction Corporation 8" which helped to systemize basic theories about cost management

accounting in engineering construction companies From that, that author proposed solutions to improve cost management accounting for subsidiaries of CIENCO8 according to contents that are closely related to the implementation of management functions such as: identifying cost, building the system of cost norms, improving the costing method via target cost and Kaizen costing methods, controlling cost via responsibility centers to serve the control and decision-making functions

In her study named “cost management accounting at engineering

construction companies in Hanoi”, Le Thi Huong (2017) systemized

theoretical basis of cost management accounting at engineering construction companies and how the characteristics of their operation affect cost management accounting That author provided solutions to improve the classification of cost, building cost norms and making cost estimates and also propose using the method of identifying target cost for engineering construction companies in Hanoi

2.2 Research gap

The author believes that there exits a research gap in management accounting, cost management accounting and management accounting

of engineering construction cost to meet the management requirements

in the context of market economy and international economic integration The author continues to inherit the results of local and international research; then studies and further clarifies several theoretical and practical issues related to management accounting of road and bridge construction costs at civil engineering construction corporations under the MOT From that, the author proposes solutions

to improve management accounting of road and bridge construction costs at civil engineering construction corporations under the MOT during the period of international economic integration

3 Research objectives and goals

Research objectives: studying and proposing solutions to

improve management accounting of cost of road construction cost at civil engineering construction corporations under the MOT in the context of market economy and international economic integration

Research goals:

+ Systemizing and analyzing to clarify basic theoretical issues of management accounting for engineering construction cost in engineering construction companies

+ Studying, analyzing experience of cost management accounting

of companies from developed countries, drawing lessons for engineering construction companies in generals and corporations under the MOT in particular

+ Evaluating the practical situation of cost management accounting at civil engineering construction corporations under the MOT, obtained results, shortcomings and reasons for shortcomings + Proposing solutions to improve management accounting of road and bridge construction costs at civil engineering construction corporations under the MOT

- What is the practical situation of management accounting of broad and bridge construction costs at civil engineering construction corporations under the MOT and shortcomings to be addressed?

- What are solutions and recommendations to improve management accounting of road and bridge construction costs at corporations under the MOT to ensure information provision for management requirements during international economic integration?

5 Research objects and scope

5.1 Research objects

Studying theoretical and practical issues of management accounting of road and bridge engineering construction costs at corporations under the MOT

5.2 Research scope

In terms of content: Studying management accounting of road

and bridge engineering construction costs at civil engineering construction corporations under the MOT from the perspective that they are are construction contractors of road and bridge works

In terms of scope: Studying civil engineering construction

corporations (including head office, dependent accounting units and subsidiaries of 6 corporations under the MOT)

In terms of time: Studying the practical situation of management

accounting of road and bridge engineering construction costs at civil engineering construction corporations under the MOT from 2016 up to now with proposals applied for coming years

6 Research methodologies

6.1 Methodology basis and approach

Regarding methodology: The thesis is done using dialectical

materialism and historical materialism and in the dialectical relationship between the activities of the business

6.2 Research methodology

The thesis applies the qualitative research method and such methods as systematic, interpretation, inductive, comparison, survey methods to analyze, evaluate and draw reasonable conclusions

7 New contributions of the thesis

In terms of theory: The thesis analyzes and evaluates operating

characteristics of engineering construction companies that affect management accounting of engineering construction cost as well as clarifies theoretical issues about management accounting of engineering construction cost in engineering construction companies such as: engineering construction cost; nature, role, and content of management accounting of engineering construction cost

In terms of reality:

+ The thesis points out that operating characteristics of corporations affect management accounting of road, bridge construction cost

The thesis conducts a survey and analyzes the practical situation

of management accounting of road and bridge construction The thesis applies qualitative measurement tools to evaluate and present the practical situation of management accounting of engineering construction cost at corporations; from that the thesis points out shortcomings and results for shortcomings

+ Based on the directions and development strategies of the transport industry and of corporations under the MOT, the thesis presents principle requirements and propose solutions to improve management accounting of road and bridge construction cost at civil engineering construction corporations under the MOT such as: identifying and classifying engineering construction cost; building the system of cost norms and estimates for cost and bridge construction cost; applying the method of construction costing; collection of implementation information

of engineering construction cost for management of accounting documents, accounts, books and report; analyzing information of road and bridge construction cost for business management

8 Structure of the thesis

Chapter1: General theory about cost management accounting at

engineering construction companies

Chapter 2: Reality of management accounting of road and bridge

construction cost at corporations under the MOT

Chapter 3: Improving management accounting of road and

bridge construction cost at corporations under the MOT

Chapter 1 GENERAL THEORY OF COST MANAGEMENT

ACCOUNTING OF ENGINEERING CONSTRUCTION COST

AT ENGINEERING CONSTRUCTION COMPANIES 1.1 Production and business characteristics of engineering construction companies affecting management accounting of engineering construction cost

Engineering construction companies have distinctive operating characteristics that affect management accounting of engineering

construction cost such as: characteristics of product, mode of production, operation, and management

1.2 Engineering construction cost and requirement for cost management at engineering construction companies

1.2.1 Concept, nature, and significance of engineering construction cost

The thesis studies many concepts of cost in general and engineering construction cost in particular from different scopes and perspectives Regardless, there are three required characteristics of cost: (1) cost is the loss of resources; (2) the lost of resources must be associated with the performance; (3) loss of resources must be assessed (measured by value)

1.2.2 Requirement for controlling construction cost

- Building cost norms and cost estimates based on appropriate scientific basis and the practical situation

- Controlling engineering construction cost according to each project and project category

- Classifying cost classified scientifically and in accordance with standards

- Controlling engineering construction cost in each unit to evaluate responsibility and performance of each unit

- Regularly analyzing, evaluating cost categories and factors to have the basis for proposing solutions to cut down cost, reduce unit price and assists the decision-making process

1.3 Management accounting of engineering construction cost in engineering construction companies

1.3.1 Nature, role of management accounting of engineering construction cost in engineering construction companies

The author concludes that: “Management accounting of

engineering construction cost is a component of management accounting that collects, processes, provides and analyzes information about the past and the future to assist company executives in planning, controlling, evaluating performance and making decisions."

The role of management accounting of engineering construction cost is shown in each management function as follows: Planning (identifying the goals to be achieved and outlines the steps to be taken