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 Design Cement Dune Buggy Nil 10

Procure:

B Order and Receive Materials A 15

Construct:

C Assemble & Test Engine B 5

D Add Suspension to Frame B 6

E Add Drive Train to Frame D 3

F Add Wheels/Axles/Steering to Frame D 4

G Test Fit Body Shell I,F,E 1

H Cast Body Shell (incl. hardening) B 5

I Sand Blast & Prime Shell H 3

J Paint Body Shell G 3

K Install Engine G,C 5

L Attach Body J,K 2

M Install Accessories L 3

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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 TEAM SIZE

A 2B 1C 5D 4E 1F 2G 3H 2I 1J 2K 3L 3M 2N 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 re-started 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?

L.Bartlett

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.________________________________________________________________

ACTIVITY ------ NORMAL ------ ----- CRASH ------- COST MAX SLOPE REDUCTION

TIME DIRECT $ TIME DIRECT $

A 10 10 10 10 _______ ________

B 15 05 12 08 _______ ________

C 13 08 12 10 _______ ________

D 06 30 03 60 _______ ________

E 03 07 01 11 _______ ________

F 04 10 02 20 _______ ________

G 01 03 01 03 _______ ________

H 05 12 04 16 _______ ________

I 03 03 02 04 _______ ________

J 03 06 02 12 _______ ________

K 05 01 05 01 _______ ________

L 02 06 01 08 _______ ________

M 03 10 01 16 _______ ________

N 02 02 01 03 _______ ________

113 182

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.

L.Bartlett

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 # ACTIVITY ID INCR. COSTS -------- TOTAL

PROJECT ---------

DIRECT COST DURATION

____ ______________ ___________ ____________ __________

____ ______________ ___________ ____________ __________

____ ______________ ___________ ____________ __________

____ ______________ ___________ ____________ __________

____ ______________ ___________ ____________ __________

____ ______________ ___________ ____________ __________

____ ______________ ___________ ____________ __________

____ ______________ ___________ ____________ __________

____ ______________ ___________ ____________ __________

____ ______________ ___________ ____________ __________

____ ______________ ___________ ____________ __________

____ ______________ ___________ ____________ __________

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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 Indirect Costs50 $ 11049 $ 10048 $ 9347 $ 8846 $ 8545 $ 8244 $ 7943 $ 7742 $ 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 INDIRECT COST TOTAL DURATION COST COST COST

(ABOVE) (ABOVE) (ABOVE)

_______ _____________ __________ _____________ ____________

_______ _____________ __________ _____________ ____________

_______ _____________ __________ _____________ ____________

_______ _____________ __________ _____________ ____________

_______ _____________ __________ _____________ ____________

_______ _____________ __________ _____________ ____________

_______ _____________ __________ _____________ ____________

_______ _____________ __________ _____________ ____________

_______ _____________ __________ _____________ ____________

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_______ _____________ __________ _____________ ____________

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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)?

L.Bartlett

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 : 10 % of ‘all-up’ costsOverhead : 35 % of all labour charges

: 10 % of all material costsLabour Rates : 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

L.Bartlett

CEMENT DUNE BUGGY PROJECT

ACTIVITY DURATIONS & HUMAN RESOURCE REQUIREMENTS

Description Durn Start Finish Man-days

Res 1 Res 2 Res 3

A-Design Dune Buggy 10 01 10 00 05 20B-Order, Receive Mat`s 12 11 22 05 00 00C-Test, Prepare Engine 11 23 33 04 20 02

D-Add Suspension 06 24 29 06 06 00E-Add Drive Train 03 34 36 06 02 00F-Add W/A/S to Frame 04 31 34 08 03 00G-Test Fit Body Shell 01 43 43 02 00 00H-Cast Body Shell 05 35 39 08 01 00I-Sand & Prime Shell 03 40 42 06 00 00J-Paint Body Shell 03 44 46 09 02 00K-Install Engine 05 44 48 03 07 02L-Attach Body 01 49 49 02 01 00M-Install Accessories 03 50 52 01 06 00N-Road Test 02 53 54 00 02 02

MATERIAL REQUIREMENTS & COSTS (ACTIVITIES AFFECTED)

CONCRETE - 1000 Kg ;$ 1 / Kg HENGINE KIT - 1 ;$ 550 CFRAME,AXELS, ETC - 1 ;$ 250 ESUSPENSION - 1 ;$ 300 DDRIVE TRAIN - 1 ;$ 300 EPAINT & TRAIN - 40 litres ;$ 2.50 /litre I,J(half &half)CONCRETE FORMS - 3 ;$ 325 (total) 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 Durn Start Finish Cost A Design Dune Buggy 10 01 10 3915B Order, Receive Materials 12 11 22 540C Test, Prepare Engine 11 23 33 4061D Add Suspension 06 25 30 2063E Add Drive Train 03 34 36 1248F Add W/A/S to Frame 04 31 34 1269G Test Fit Body Shell 01 43 43 227H Cast Body Shell 05 35 39 2457I Sand & Prime Shell 03 40 42 725J Paint Body Shell 03 44 46 1359K Install Engine 05 44 48 1673L Attach Body 01 49 49 369M Install Accessories 03 50 52 964N Road Test 02 53 54 608

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 --PERIOD 2-- --PERIOD 5-- --PERIOD 8-- TOTAL

% COMP- LETED

EV ACTUALCOSTS

% EV ACTUALCOSTS

% EV ACTUALCOSTS

TOTALBUDGET

A 100 % 3,915 5,630 100 % 3,915 5,630 100 % 3,915 5,630 3,915

B 0 % 100 % 540 446 100 % 540 446 540

C 10 % 406 300 100 % 4,061 3,700 4,061

D 100 % 2,063 1,800 2,063

E 100 % 1,248 1,200 1,248

F 100 % 1,269 950 1,269

G 100 % 227 120 227

H 100 % 2,457 2,100 2,457

I 33 % 242 900 725

J 0 % - - 1,359

K 0 % - - 1,673

L 0 % - - 369

M 0 % - - 964

N 0 % - - 608

TTL 3,915 5,630 4,861 6,376 16,022 16,846 21,478

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?

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3. What is the trend pattern?

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