Teaneck Case Study

Applied Management Science Case: Teaneck Construction Company
TEANECK CONSTRUCTION COMPANY
Teaneck is a small organization with 90% of its peso volume obtained from contracts for municipal w
decided to submit a bid for the construction in April of a mile-long extension to the main sewer system
which until now has used septic tanks. The bidding is expected to be competitive because whoeve
will have some advantage in obtaining a contract to be awarded by the town later in the year worth
In order to submit the most competitive bid possible, the project managers of Teaneck decide
alternatives of using one, two or three work shifts.
Table 1 shows time and cost estimates of Teanecks engineers. The trunk sewer extension is to be
1/3 its length; the remaining 2/3 is to be constructed in trenches. To build the tunnel, a prim
excavated first, then the secondary shafts can be driven and the tunnel can be dug simultaneously.
started at the same time as the primary shaft. Another crew of workers follows the trench workers, la
concrete and refilling trenches as far as they have been excavated. The excavators lose no time as a
up. A third group would be performing a similar function in the tunnel.
Teanecks direct labor is hired from union pools. There is a strong chance that the local Excavators
the projects inception date which may seriously affect its profitability. At a meeting of the project m
a consensus to use 80% probability of such a strike for planning purposes. With a strike, direct c
unchanged, since the issue involved was not one of wages; but indirect costs would accrue for the du
at the same daily rate as indicated in Table 1. General and administrative costs are put at 40% of the
indirect costs. Normally, Teaneck aims at making a profit equal to 10% of total costs.
There was also a recognized need to develop some kind of estimate to describe the probability of the
With a great deal of misgiving, the project managers came up with the following guesses:
A
B
C
D
E
F
G
H
J
K
L
M
ACTIVITY
Move in machinery/equipment
Excavate primary shaft
Excavate secondary shafts
Excavate trenches
Excavate tunnel
Backfill (trenches only)
Pipelaying in trenches
Pipelaying in tunnel
Pour concrete in trenches
Pour concrete in tunnel
Landscape
Move out
PRECEDED BY
A
B
A
B
J
D
C,E
G
H
F,K
L
Critical Path:
Activity A = 12 days
Activity D = 312 days
Activity G = 362 days
Activity J = 432 days
Activity F = 482 days
Activity L = 492 days
Activity M = 497 days
ES (Early EF (Early
Start)
Finish)
C
24
84
60
312
372
LS (Late
Start)
LF (Late
Finish)
B
12
24
12
55
67
Total = 497 days

START
`
A
0
12
12
0
12
E
24
329
Excavate tunnel
305
67
372
H
329
379
50
372
422
K
379
439
60
422
482
L
482
492
Landscape
10
482
492
D
12
312
Excavate trenches
300
12
312
G
312
362
50
312
362
J
362
432
70
362
432
F
432
482
50
432
482
492
497
Move out
5
492
497
Critical Path:
Activity A = 6 days
ES (Early EF (Early
Start)
Finish)
C
18
42
24
162
186
LS (Late
Start)
LF (Late
Finish)
B
6
18
12
19
31
Total = 252 days

START
`
A
0
6
6
0
6
E
18
173
Excavate tunnel
155
31
186
H
173
198
25
186
211
K
198
228
30
211
241
L
8
D
6
156
Excavate trenches
150
6
156
G
156
181
25
156
181
J
181
216
35
181
216
F
216
241
25
216
241
241
249
Landscape
241
249
249
252
Move out
3
249
252
Critical Path:
Activity A = 4 days
ES (Early EF (Early
Start)
Finish)
C
16
28
12
116
128
LS (Late
Start)
LF (Late
Finish)
B
4
16
12
11
23
Total = 171 days

START
`
A
0
4
4
0
4
E
16
121
Excavate tunnel
105
23
128
H
121
136
15
128
143
K
136
156
20
143
163
L
6
D
4
104
Excavate trenches
100
4
104
G
104
121
17
104
121
J
121
146
25
121
146
F
146
163
17
146
163
163
169
Landscape
163
169
169
171
Move out
2
169
171
One Shift
ACTIVITY
Preceded by
Days
Pesos
12
150,000
12
347,500
Two Shifts
Total Days
Days
Pesos
12
165,000
24
12
347,500
Three Shifts
Total Days
Days
Pesos
Total Days
180,000
18
12
347,500
16
60
312,500
84
24
330,000
42
12
347,000
28
Excavate trenches
300
1,685,000
312
150
2,125,000
156
100
2,250,000
104
Excavate tunnel
305
1,807,500
329
155
1,955,000
173
105
2,000,000
121
50
50,000
482
25
75,000
241
17
100,000
163
50
375,000
362
25
410,000
181
17
445,000
121
50
275,000
379
25
285,000
198
15
300,000
136
70
570,000
432
35
582,500
216
25
592,500
146
60
550,000
439
30
562,500
228
20
575,000
156
Landscape
F,K
10
100,000
492
145,000
249
150,000
169
Move out
25,000
497
37,500
252
50,000
6,247,500
Total Direct Costs PHP

Indirect Costs PHP
Addtl Indirect Costs due to strike 100%
Total Indirect Costs PHP
General and Administrative cost (40% of the sum of Direct and Indirect Costs)
Total Cost
Desired Profit 10%
Projected Bid
7,000 day
32.5 days
3,479,000
227,500
3,706,500
7,020,000
8,000 day
2,016,000
260,000
2,276,000
171
7,337,000
9,000 day
1,539,000
292,500
1,831,500
3,981,600
13,935,600
3,718,400
13,014,400
3,667,400
12,835,900
1,393,560
1,301,440
1,283,590
14,315,840
14,119,490
###
One Shift
ACTIVITY
Preceded by
Days
Pesos
12
150,000
12
347,500
Two Shifts
Total Days
Days
Pesos
12
165,000
24
12
347,500
Three Shifts
Total Days
Days
Pesos
Total Days
180,000
18
12
347,500
16
60
312,500
84
24
330,000
42
12
347,000
28
Excavate trenches
300
1,685,000
312
150
2,125,000
156
100
2,250,000
104
Excavate tunnel
305
1,807,500
329
155
1,955,000
173
105
2,000,000
121
50
50,000
482
25
75,000
241
17
100,000
163
50
375,000
362
25
410,000
181
17
445,000
121
50
275,000
379
25
285,000
198
15
300,000
136
70
570,000
432
35
582,500
216
25
592,500
146
60
550,000
439
30
562,500
228
20
575,000
156
Landscape
F,K
10
100,000
492
145,000
249
150,000
169
Move out
25,000
497
37,500
252
50,000
6,247,500

Indirect Costs PHP
Addtl Indirect Costs due to strike 80%
Total Cost
Desired Profit 10%
Projected Bid
7,000 day
26.0 days
3,479,000
182,000
3,661,000
7,020,000
8,000 day
2,016,000
208,000
2,224,000
171
7,337,000
9,000 day
1,539,000
234,000
1,773,000
3,963,400
13,871,900
3,697,600
12,941,600
3,644,000
12,754,000
1,387,190
1,294,160
1,275,400
14,235,760
14,029,400
###
One Shift
ACTIVITY
Preceded by
Days
Pesos
12
150,000
12
347,500
Two Shifts
Total Days
Days
Pesos
12
165,000
24
12
347,500
Three Shifts
Total Days
Days
Pesos
Total Days
180,000
18
12
347,500
16
60
312,500
84
24
330,000
42
12
347,000
28
Excavate trenches
300
1,685,000
312
150
2,125,000
156
100
2,250,000
104
Excavate tunnel
305
1,807,500
329
155
1,955,000
173
105
2,000,000
121
50
50,000
482
25
75,000
241
17
100,000
163
50
375,000
362
25
410,000
181
17
445,000
121
50
275,000
379
25
285,000
198
15
300,000
136
70
570,000
432
35
582,500
216
25
592,500
146
60
550,000
439
30
562,500
228
20
575,000
156
Landscape
F,K
10
100,000
492
145,000
249
150,000
169
Move out
25,000
497
37,500
252
50,000
6,247,500

Indirect Costs PHP
Addtl Indirect Costs due to strike
Total Cost
Desired Profit 10%
Projected Bid
7,000 day
0.0 days
3,479,000
3,479,000
7,020,000
8,000 day
2,016,000
2,016,000
171
7,337,000
9,000 day
1,539,000
1,539,000
3,890,600
13,617,100
3,614,400
12,650,400
3,550,400
12,426,400
1,361,710
1,265,040
1,242,640
13,915,440
13,669,040
###
# of
Strike
Days
20
30
40
Probabilit
y P(x)
0.25
0.25
0.50
1.00
x * P(x)
(x-u)^2
5.00
7.50
20.00
32.5000 Mean
156.25
6.25
56.25
(x-u)^2 *
P(x)
39.0625
1.5625
28.1250
68.75000 Variance
8.29156 Standard Deviation

Teaneck Case Study

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Teaneck Case Study

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Applied Management Science Case: Teaneck Construction Company

TEANECK CONSTRUCTION COMPANY

Total = 497 days

Total = 252 days

Total = 171 days

Excavate primary shaft

Excavate secondary shafts

Backfill (trenches only)

Pour concrete in trenches

Pour concrete in tunnel

Total Direct Costs PHP

Excavate primary shaft

Excavate secondary shafts

Backfill (trenches only)

Pour concrete in trenches

Pour concrete in tunnel

Total Direct Costs PHP

Excavate primary shaft

Excavate secondary shafts

Backfill (trenches only)

Pour concrete in trenches

Pour concrete in tunnel

Total Direct Costs PHP

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