CEMENT DUNE BUGGY PROJECT

Project Scenario: You are a "fast tracker" at the A-1 Cement Company, looking for an opportunity to impress your superiors. Management has assigned you to over-see the construction of Cement Dune Buggy for the president's son. After consultation with a variety of builders, and in consideration of your career prospects, you decide that this project must be completed on time and within budget, and that a proper CPM must be constructed to plan and control the activities of the project. After consulting one of your colleagues who has completed the McGill Executive Institute Advanced Project Management Course, you decide that your first step will be to determine distinct "Phases" for your project. The end of each phase will mark a project "Milestone", at which point you will conduct a formal review with Management. You decide that a logical delineation would be Design/Procure/Construct/Test. With planned Project Phases in place, you proceed with detailed planning of your activities, each of which will fall within a single Phase. At this point, you choose to concentrate your planning efforts on the Construction Phase. You therefore proceed to break down the construction activities into logical tasks, leaving the other phases to remain as single tasks for the time being. Construction can proceed as three concurrent "mini-projects"; the engine development, the construction of the body shell, and the frame. The engine will be purchased, but will require assembly and testing prior to installation of the frame. The 4 frame sub-assemblies (frame/seats, suspension, drive train, wheels/axles/steering) will be ordered complete. The latter three items must be assembled on to the frame. The suspension must be added to the frame firstly. Then, the drive train and wheels/axles/steering may be added concurrently. Once the frame is totally assembled, then the engine may be installed, except that you would like to "test fit" the body shell to the completed frame prior to installation of the engine. The cement body shell will be cast on the premises. Hardening will take 3 days. Then, it will be sand blasted and primed, and be available for the "test fit". Successful completion of the "test fit" will then enable final painting to be accomplished. Once the engine is attached to the completed frame, then the painted body may be attached. Internal accessories may then be installed, so that a final road test may be completed, along with the project. EXERCISE 1 Through a team planning session, you have derived a list of major activities listed on the next page, along with durations in days. Through a wall chart exercise you have been able to identify, for each activity, the predecessor activities which must be completed in order to begin. How long will the project take? What is the critical path?

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CEMENT DUNEBUGGY MASTER TASK LIST ACT. ID ACTIVITY DESCRIPTION PREDECESORS TIME (days)

Design: A Procure: B Order and Receive Materials A 15 Design Cement Dune Buggy Nil 10

Construct: C D E F G H I J K L M
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Assemble & Test Engine Add Suspension to Frame Add Drive Train to Frame Add Wheels/Axles/Steering to Frame Test Fit Body Shell Cast Body Shell (incl. hardening) Sand Blast & Prime Shell Paint Body Shell Install Engine Attach Body Install Accessories G,C J,K L I,F,E

B B D D 1 B H G 5 2 3

5 6 3 4

5 3 3

Test: N Road Test M 2

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EXERCISE 2 Resource Requirements; Early Start Scenario You now set to work to define the resources required to do the work, in order to determine peak requirements and timeframes.. You wish to determine the total number of resources you will need at any given time in your project, in order to plan for assignment and training of personnel. You start by estimating the team size (number of individuals working simultaneously) for each of the tasks, as listed below. Using your critical path network for the cement dune buggy project, and the resource levelling worksheet found on the next page (or equivalent found in WebCT for Topic 16), draw a time scaled network, assuming early start for all activities. Assume that one generic resource is required to construct the dune buggy, and that the time frame must be respected. Determine the peak staff required to complete the project.

ACTIVITY
A B C D E F G H I J K L M N

TEAM SIZE
2 1 5 4 1 2 3 2 1 2 3 3 2 2

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EXERCISE 3 Resource Requirements; Time Constrained While maintaining the existing schedule completion date, you would like to determine if resources can be used more effectively, by delaying certain non-critical tasks. Determine if peak requirements may be reduced, and to what resource `pool size`, while maintaining the existing project duration. Use the attached resource levelling worksheet Time Constrained, or the equivalent Excel spreadsheet found in WebCT Topic 16. EXERCISE 4 - Resource Leveling; Resource Constrained Management would like to investigate the implact on the project if no more than 6 people at one time will be permitted to work on the dune buggy project. How long would the project take, assuming activities cannot be "split". i.e. stopped mid-way and restarted later on. Use the attached resource levelling worksheet Resource Constrained. EXERCISE 5 Changes to task duration Management has agreed to add provide your project with all the necessary resources required to complete the project as early as possible (ie as determined in Exercise 1). In the meantime however, your team has been investigating a key task that has been identified as carrying considerable uncertainty, ie Task C, `Assemble & Test Engine`. You have invited to specialized contractor to quote on this work along with an agreed delivery schedule. This schedule spans 13 working days. What is the impact on your project duration? Which tasks are now critical?

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EXERCISE 6 - Project `Crashing` While Management is impressed with your analytical skills in "flushing-out" potential problems in the engine assembly, they would like you to look at ways in which you could reduce the total project duration (i.e. from that determined from Exercise 5). Of course they would like to minimizing the cost impact of any reduction in project duration. You have therefore interviewed your supervisors, and obtained estimates related to the normal and "crash" costs for each of the Cement Dune Buggy Project activities. (Note - all `normal durations` are as per Exercise 5 scenario.) Costs shown below are in 'thousands' of dollars. Step 1 - Determine the `cost slope` and ` maximum (time) reduction ` for each task.

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ACTIVITY ------ NORMAL -----TIME A B C D E F G H I J K L M N 10 15 13 06 03 04 01 05 03 03 05 02 03 02 DIRECT $ 10 05 08 30 07 10 03 12 03 06 01 06 10 02 113 ----- CRASH ------TIME DIRECT $ 10 12 12 03 01 02 01 04 02 02 05 01 01 01 10 08 10 60 11 20 03 16 04 12 01 08 16 03 182 _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ _______ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ COST SLOPE MAX REDUCTION

Now, recognizing the large impact on costs if all the work was to be crashed in order to be reduce the project duration, you employ the logic embedded in your Critical Path Network, in order to reduce duration in a cost-effective manner.

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Step 2 - Given the Normal and Crash Direct Costs you have determined above, determine the total direct costs for the Cement Dune Buggy Project, for each unit reduction of time. Examine the cost impact of reducing the time of the project, investigating each project duration scenario down to a value of 42 days. (Begin the exercise assuming the project duration calculated from Exercise 5.) Use the following worksheet template for your solution: STEP # PROJECT --------DIRECT COST DURATION ACTIVITY ID INCR. COSTS -------TOTAL

____ ______________ ___________ ____________ ____ ______________ ___________ ____________ ____ ______________ ___________ ____________ ____ ______________ ___________ ____________ ____ ______________ ___________ ____________ ____ ______________ ___________ ____________ ____ ______________ ___________ ____________ ____ ______________ ___________ ____________ ____ ______________ ___________ ____________ ____ ______________ ___________ ____________ ____ ______________ ___________ ____________ ____ ______________ ___________ ____________
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__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________

____ ______________ ___________ ____________

__________

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Step 3 Indirect Costs Offsetting the increased direct costs will be a savings in indirect costs, particularly for expensive supervisory staff that had been assigned to your project. You have worked out the following indirect costs. Corresponding to each respective project duration scenario. Duration 50 49 48 47 46 45 44 43 42 Indirect Costs $ 110 $ 100 $ 93 $ 88 $ 85 $ 82 $ 79 $ 77 $ 75

Using the above indirect costs, and the direct costs established from Step 2 above, determine the optimum schedule and minimum cost for this project. (Again, begin the exercise assuming the project duration calculated from Exercise 5.) STEP # PROJECT DIRECT DURATION COST (ABOVE) (ABOVE) _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ INDIRECT COST COST (ABOVE) _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ TOTAL COST

_______ _______ _______ _______ _______ _______ _______ _______ _______ _______ L.Bartlett

____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________

Step 3 Indirect Costs (cont`d) Q1 - What is the duration of this `optimal schedule`? Q2 - What is the corresponding total cost? Q3 - What lump sum incentive would be required to reduce the project by 2 additional days (i.e. finish the project 2 days earlier than the "optimum' date)?

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EXERCISE 7 - Estimating Stimulated by the commercial interest in the Cement Dune Buggy, Management has decided to develop a complete bottom-up estimate, factoring not only labour and indirect (overhead) costs, but also material costs, contingencies, and profits in order to determine a complete competitive price for the Cement Dune Buggy. The goal of this exercise is to determine a (single) base price for the Dune Buggy. Employ the schedule and resource assignment data found on the following page. This schedule has been modified to reflect further adjustments, and spanning 54 days total. Apply the following information: Profit Overhead Labour Rates : 10 % of all-up costs : 35 % of all labour charges : 10 % of all material costs : skill level 1 - $ 80/day : skill level 2 - $ 100/day : skill level 3 - $ 120/ day Note - rates for skill levels 1 & 2 will increase by 5% starting on day 41 of the project. Contingencies: Design: 7 % of total project direct cost (i.e. lab and materials) :

Estimating: 3 % of activity labour & material costs that involve concrete casting, finishing & painting (i.e. H, I, J) 7 % of activity labour costs of assembly tasks (i.e. D,E,F,K,L,M) 100 % of labour for major testing activities (i.e. G,N,C) Material: 3 project days worth of total project labour costs

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CEMENT DUNE BUGGY PROJECT ACTIVITY DURATIONS & HUMAN RESOURCE REQUIREMENTS Description Durn Start Finish Res 1 A-Design Dune Buggy B-Order, Receive Mat`s C-Test, Prepare Engine D-Add Suspension E-Add Drive Train F-Add W/A/S to Frame G-Test Fit Body Shell H-Cast Body Shell I-Sand & Prime Shell J-Paint Body Shell K-Install Engine L-Attach Body M-Install Accessories N-Road Test 10 12 11 06 03 04 01 05 03 03 05 01 03 02 01 11 23 24 34 31 43 35 40 44 44 49 50 53 10 22 33 29 36 34 43 39 42 46 48 49 52 54 00 05 04 06 06 08 02 08 06 09 03 02 01 00 Man-days Res 2 05 00 20 06 02 03 00 01 00 02 07 01 06 02 Res 3 20 00 02 00 00 00 00 00 00 00 02 00 00 02

MATERIAL REQUIREMENTS & COSTS CONCRETE ENGINE KIT FRAME,AXELS, ETC SUSPENSION DRIVE TRAIN PAINT & TRAIN CONCRETE FORMS - 1000 Kg -1 -1 -1 -1 - 40 litres -3 ;$ 1 / Kg ;$ 550 ;$ 250 ;$ 300 ;$ 300 ;$ 2.50 /litre ;$ 325 (total)

(ACTIVITIES AFFECTED) H C E D E I,J(half &half) H

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EXERCISE 8 Earned Value - `Planned Costs`

As the first days of work on the Dune Buggy progress, you are concerned that information provided to you from your seconded supervisors, in terms of work completed, may not be accurate. As a result you may be experiencing problems which will only surface much later, when it will be to late for corrective action. To remedy the problem, you decide to implement the same system of rigid controls that A-1 is being forced to apply on its military contracts, ie. Earned Value. As a first step, using the following pricing data developed for the Cement Dune Buggy Project augmented with overhead costs, determine a cost/schedule baseline, by calculating the Planned Value (PV) for each of days 10, 25 and 40 . Assume that all activity costs are distributed evenly on a daily basis. What is the Budget at Completion (BAC)? Description A B C D E F G H I J K L M N Design Dune Buggy Order, Receive Materials Test, Prepare Engine Add Suspension Add Drive Train Add W/A/S to Frame Test Fit Body Shell Cast Body Shell Sand & Prime Shell Paint Body Shell Install Engine Attach Body Install Accessories Road Test Durn 10 12 11 06 03 04 01 05 03 03 05 01 03 02 Start 01 11 23 25 34 31 43 35 40 44 44 49 50 53 Finish 10 22 33 30 36 34 43 39 42 46 48 49 52 54 Cost 3915 540 4061 2063 1248 1269 227 2457 725 1359 1673 369 964 608 21,478

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EXERCISE 9 Earned Value - `Earned and Actual Costs`

You have compiled the following cost statistics at the end of days 10, 25 and 40.
I.D % COMPLETED --PERIOD 2-EV ACTUAL COSTS --PERIOD 5-% EV ACTUAL COSTS --PERIOD 8-% EV TOTAL ACTUAL COSTS TOTAL BUDGET

A B C D E F G H I J K L M N TTL

100 % 0%

3,915

5,630

100 % 100 % 10 %

3,915 540 406

5,630 446 300

100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 33 % 0% 0% 0% 0% 0%

3,915 540 4,061 2,063 1,248 1,269 227 2,457 242 16,022

5,630 446 3,700 1,800 1,200 950 120 2,100 900 16,846

3,915 540 4,061 2,063 1,248 1,269 227 2,457 725 1,359 1,673 369 964 608 21,478

3,915

5,630

4,861

6,376

1. To each of Days 10, 25 and 40 calculate the following for the project: EV AC ETC EAC COST VARIANCE SCHEDULE VARIANCE
2.

For each of Days 10, 25 and 40, where does the project stand with respect to costs, and schedule?

3. What is the trend pattern? L.Bartlett