[Writer Nаme]
[Supervisor Nаme]
[Dаte]
Overview of Sharon construction company
The Sharon Construction company was given the contract to construct a stadium with 20,000 seats in it. The construction was supposed to commence on 15th February and was expected to take one year to complete. The contract contained a clause of penalty, which stated that any delay of one week further ahead of 15th February of next year will cause a penalty of US$ 15,000 per week. Jim Brown was the president of the company. He called a meeting to plan the project management schedule and express his concerns and satisfaction of gaining the contract for this project. He also revealed that the company can benefit an approximate amount of US$ 300,000 from this project. He was extremely confident that his construction company will be able to complete the project on time and will be able to receive an early completion allowance instead of any penalties for the week delay as written in the contract.
On the other hand, the director of personnel claimed that during a year there are certain delays possible in the project timeline as the labor was insufficient was such a large project. However, she also explained to the president that in order to complete the construction project on a timely basis, it was required that union employees must also be utilized, and there were fifty-fifty chances that they can go on strike to meet their demands. There was a 70 percent chance that this strike can occur for eight weeks and 30 percent chance that this strike can stretch to twelve weeks. Another issue was raised by the vice president of engineering department that this December will witness a colder weather. The concrete pouring during December was an issue and require a heating system that would cost US$ 500 per week. There were five proposals that were submitted for the project completion. These were:
The first proposal stated that the pouring of seat gallery support must be expedited. This would require an expense of US$ 20,000 and will reduce the completion time by six weeks.
The second proposal required the similar guidelines as stated in Proposal 1 must be followed, but a double shift must be added on the filling of the field. This would require an expense of US$ 10,000 and will reduce the completion time by five weeks.
The third proposal stated that the construction of the roof is essential since it precedes many other activities in project construction phase. If three shifts were used and some overtime was incurred, this would cost an additional amount of US$ 9,000 and provide a time reduction of six weeks.
Nothing extra must be done to complete the project earlier until December. If December is cold, the pouring process must be held until the cold wave is waived off. If the strike occurs, time should be taken until it is over, and then the process must be expedited.
No extra effort must be done, and no special activity must be in place and pray and watch strategy must be applied that no December cold and union strikes may occur.
Analyze the five proposals and make recommendations based on expected costs.
In order to analyze the above-stated case and evaluate the five proposals, there were some initial tasks that were required to be initiated. At first I uploaded the main tasks and their time durations mentioned in the case and then with the help of assigned predecessors, I linked all the information together to initiate a project management assignment. Then a summary of the highlighted tasks was developed. In the figure below, the summary tasks demonstrate complete project initiation and completion timeline with duration of 48 weeks. As mentioned at the start of this report that this project will be initiated on 15th February and since February has 28 days, I had to timeline the project according. In order to accomplish my aim, I went to project drop down menu and clicked on project information window and found out that February 2010 fits this criterion. So in the project management schedule, the project was initiated on Monday February 15th, 2010. The issue of strikes and weather constraints is kept constant and it is expected that the stadium construction project will be completed on January 14th, 2011 which will be around four weeks ahead of the one-year deadline stated in the final contract.
Then a worst case scenario was assumed that around 12 weeks strike is in process which had a 30 percent chances as mentioned earlier and another limitation applied was the requirement of heating plant for pouring of concrete in cold days of December, then the following schedule will be followed. In order to add a 12 week strike in the schedule starting from 1st December 2010, I entered 1st December 2010 to 23rd February 2011 as non-operational days when the labor will be on strike. The results on this issue is as follows:
It is important to note here, that this project has now ended on 11th April 2011, and this about 8 weeks later than the original deadline of 15th February 2011. The cost per day was calculated as follows:
US$ 15000/week x 8 weeks = US$ 120,000 (penalty clause)
US$ 500/week x 4 weeks = US$ 2,000 (heating cost for pouring concrete in December)
US$ 500/week x 8 weeks = US$ 4,000 (overhead cost per week of delay)
Total cost $126,000.
It is now assumed that the worst case scenario is in place and the cold days of December and strike of labor will occur. There were five different proposals that were evaluated, and recommendations were made accordingly.
Proposal 1: The first proposal stated that the pouring of seat gallery support must be expedited. This would require an expense of US$ 20,000 and will reduce the completion time by six weeks.
When the schedule is changed, a change is brought in the schedule of the duration of pouring of seat gallery support which must be expedited and completed in 6 weeks rather in 12 weeks that was planned initially. The assumption is still the same with this proposal that a net gain of more than US$ 300,000 still exists as there are chances that the project can be completed on time at a cost of US$ 20,000, but the striking factor is still taken into consideration here which can cause some minor delay and cannot be ignored in any case. This leaves us with a conclusion that Proposal 1 is at a high-level of risk.
US$ 20,000 (task expedition cost)
US$ 15,000 / week x 2 weeks = US$ 30,000 (delay penalty clause mentioned in the contract)
US$ 500 / week x 2 weeks = US$ 1,000 (additional overhead cost of delays)
Total cost U$ 50,000. (No heating cost is occurring in this proposal as no pouring of concrete will take place in the cold winter days of December)
Proposal 2: The second proposal required the similar guidelines as stated in Proposal 1 must be followed, but a double shift must be added on the filling of the field. This would require an expense of US$ 10,000 and will reduce the completion time by five weeks. In this proposal, it is important to note that the field filling activity will not be on the critical path and will provide a reduction of five weeks in the completion time but at an expense of US$ 10,000. This would mean that the costs incurred in Proposal 1 plus this additional cost of US$ 10,000 will incur in Proposal 2.
The total cost of this proposal would be:
US$ 50,000 (Cost incurred in Proposal 1)
US$ 10,000 (Expedite fees for field filling activity in Proposal 2 )
Total cost is US$ 60,000.
This means that Proposal 2 is not feasible in comparison to Proposal 1 and will not be implemented.
Proposal 3: The third proposal stated that the construction of the roof is essential since it precedes many other activities in project construction phase. If three shifts were used and some overtime was incurred, this would cost an additional amount of US$ 9,000 and provide a time reduction of six weeks.
In this proposal, it is important to note that this roof activity will cost an additional amount of US$ 9,000 but will also provide a reduction in time of six weeks, but this will not be on the critical path and the costs associated in Proposal 3 is the same as I calculated in the worst case scenario initially with chances of 12 week strike and pouring of heat of concrete in cold days of December winter. The costs incurred will be
US$ 15000/week x 8 weeks = US$ 120,000 (penalty clause)
US$ 500/week x 4 weeks = US$ 2,000 (heating cost for pouring concrete in December)
US$ 500/week x 8 weeks = US$ 4,000 (overhead cost per week of delay)
Total cost $126,000.
This cost means that Proposal 3 is not feasible in comparison to Proposal 1 and 2 as it has a high cost and should be rejected on an urgent basis.
Proposal 4: Nothing extra must be done to complete the project earlier until December. There are two scenarios presented in this proposal In the first scenario, if December is cold, the pouring process must be held until the cold wave is waived off. In the second scenario, if the strike occurs, time should be taken until it is over, and then the process must be expedited. In this case, the time duration incurred in any activity cannot be less than one-third of the normal time of completion of the task, and an additional cost per activity will be incurred costing US$ 3,000. Let’s estimate both scenarios on a separate basis.
Scenario 1: if December is cold, the pouring process must be held until the cold wave is waived off.
It is important to note that in the schedule above for Proposal 4 scenario 1, the activity 12 is forced to be instigated on 3rd January 2011. This is after the cold winter days of December are over. This basically results in a lag of three days on the schedule. The costs that are linked with this situation are:
US$ 15,000 x 3/7 = US$ 6,249 (The weekly penalty is US$ 15,000, but we will calculate for 3 days only)
US$ 500 x 3/7 = US$ 214
Total cost US$ 6463
Scenario 2: If the strike occurs, time should be taken until it is over, and then the process must be expedited. In this case, the time duration incurred in any activity cannot be less than one-third of the normal time of completion of the task, and an additional cost per activity will be incurred costing US$ 3,000. In this case, the two critical activites that will go in pending will be paint seats which will take 3 weeks and the pout seats which will take 4 weeks to complete. I am assuming that both activities time duration is completed to 1 week and the schedule will be as follows:
Since a total of 4 weeks is reduced from both the activities of seating discussed above, the project will now be completed on 7th March 2011 which means almost three weeks later than the desired completion time. The costs incurred in this situation is as follows:
US$ 15,000/week x 3 weeks = US$ 45,000 (penalty clause mentioned in the contract)
US$ 3,000 /week x 3 weeks = US$ 9,000 (the reduction of activities as mentioned above)
Total $54,000.
Proposal 5: No extra effort must be done, and no special activity must be in place and pray and watch strategy must be applied that no December cold and union strikes may occur.
Once all five proposals are evaluated, it is not possible to recommend the best possible proposal which must be implemented. Based on the calculations and analysis stated above, I believe and highly recommend that the company must take into consideration the worst case situation where it was assumed that around 12 weeks strike is in process which had a 30 percent chances as mentioned earlier and another limitation applied was the requirement of heating plant for pouring of concrete in cold days of December. This would mean that Proposal 1 is feasible and must be implemented. The project will be completed on 28th February, 2011 which is around 2 weeks behind schedule, even if a prolonged strike issue occurs and would also cost US$ 50,000 which is far less than costs incurred in other proposals.
What another basis might be used to make a decision besides expected costs? What then might the decision be?
Apart from the expected costs, there are many other reasons that can help in expediting the construction project and complete it on a timely basis. The reasons can be intense competition, goodwill of the company which affects the company’s brand name and reputation for the upcoming projects, the expectations of the client and political implications. In this scenario as well, Proposal 1 must be implemented.
What other factors might enter into the decision such as behavioral, organizational, and political?
As mentioned above, there are many other factors that can enter into the expedite of the project, for example, various political implications associated with a construction project. Apart from this the labor union has the power to slow the job process and increase the time duration of the project. There is also a possibility, that Sharon construction company might lose on some critical human resource during the project phase that might cause the project to slow down as the time and cost will be incurred to search and replace an employee.
What decision would you make as the president?
As a president, I would prefer listening to the advice of my employees, would appreciate their ideas and concepts and all the final decisions will be based on mutual consent. The worst and risks associated with Proposal 1 will be discussed in planning meetings, and the final decision will be taken with due consideration.
