07-12-2019

Project Execution Dilemma

at MICC
Hasmukh Gajjar

Background
 What is Refurbishing Project (RP) of NIM?
 Scope: Refurbishing external and internal facade of Main Building ( 4
classroom blocks, 3 faculty blocks, 2 admin blocks)
 Major activities: Stone removal, Plastering, Painting
 INR 30 million contract
 Time line: 8 months
 Contract was awarded to MICC on Nov 17, 2012 after due tendering
process
 Crucial milestone : Work in the four classroom blocks to be completed
before the commencement of new academic term i.e. June 1, 2013

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Background
EXHIBIT 4: MAJOR MILESTONES

Sr. Description*# Time allowed Amount to be withheld

No. from the date of the by NIM in case of
award of the the non-achievement
contract of milestones
(in months ) (in INR millions)
Completion of four classroom
1 4 1.2
blocks (i.e., 40 per cent work)
Completion of 2 Administrative
2 Blocks 6 0.6
(i.e., 60 per cent work)
Completion of 2 Faculty Blocks
3 7 0.6
(i.e., 80 per cent work)
4 Final completion 8 0.4

Per cent equivalent work completion is proportionate to time required; however, the buffer time is provided for smooth
project execution.
# NIM would take 10 days to settle bills presented by MICC after achieving particular milestones.
Source: Project Tender Documents.

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Current Problems in RP
What problems did MICC face in the Refurbishing Project?
 As per conditions of the tender, MICC had to complete the project within eight
months from the date of award of the contract.
 However, a month after the commencement of work, Parkhi observed a very slow
pace of work due to a poor deployment of resources and ad-hoc project planning.
 It was envisaged that the project could be delayed and that MICC could not even
achieve the first crucial milestone (completing work on the classroom blocks of the
main building).
 The potential project delay would result in a cost overrun, a reduction in the profit
margin and a loss of reputation for MICC, which would force NIM to make alternate
arrangements for classroom blocks.
 Parkhi considered how to fast-track the project execution and also contemplated the
pros and cons of the early completion of the project.

Current Problems in RP
What could the possible causes for the execution
delay be?
Ad-hoc planning approach
In-sufficient resource deployment
Lower Productivity of team
Loose monitoring and control mechanism

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Consequences of ad-hoc
project planning to various stakeholders
 For MICC
 Loss of goodwill or reputation
 Cost overrun resulting into a reduced profit margin
 Working capital issue
 Opportunity loss to begin upcoming projects on time
 For users (faculty, students, visitors)
 More risk and inconvenience in using main building
 For NIM
 Non-availability of classroom blocks for next academic year
 Additional efforts and costs for alternate arrangements
 Loss of goodwill

Plan for a typical work-front

 Total work content: 28000 sq.m. external façade and 24400 sq.m.
internal façade area
 MICC divided work in 14 equal parts (2000 sq.m. area of external
façade)
 Limited availability of scaffolding i.e. only 2000 sq.m was available
 MICC decided to complete all 14 fronts in sequential manner based
on availability of scaffolding.
 Scaffolding was not required for painting activities
 MICC Planned to complete one part i.e. work-front in one month
period and all 14 fronts in 7 months?

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Plan for a typical work-front

(No. of teams)
(m2/team/day)
Work content
for a typical
Predecessors

No. of days
required to
Total work

work front

resources
relationship

Work rate
Precedence

complete
Planned
content

activity
(in m )

(in m )
Activity

2
(a) (b) =a/14 fronts (c) (d) (e) = a/(c*d)
A - - 28,000 2,000 250 4 2
B A SS+1day 28,000 2,000 20.00 20 5
C B SS+1day 28,000 2,000 36.36 11 5
D C SS+1day 2,800 200 40 1 5
E D SS+1day 2,800 200 40 1 5
F E SS+1day 28,000 2,000 41.67 8 6
G F SS+1day 28,000 2,000 33.33 10 6
H G FS+0 day 28,000 2,000 500 1 4
I G SS+13days 28,000 2,000 166.67 2 6
J I SS+1day 28,000 2,000 71.43 4 7
K J SS+1day 28,000 2,000 57.14 5 7
L K SS+1day 28,000 2,000 40.82 7 7
M - - 24,400 1,743 44.69 3 13
N M SS+1day 24,400 1,743 29.05 4 15
O N SS+1day 24,400 1,743 48.42 2 18
P O SS+1day 24,400 1,743 48.42 2 18
Q P SS+1day 24,400 1,743 48.42 2 18

Plan for a typical work-front

Figures inside bar chart show the number of teams assigned on each day

Activity

A 4 4
B 20 20 20 20 20
C 11 11 11 11 11
D 1 1 1 1 1
E 1 1 1 1 1
F 8 8 8 8 8 8
G 10 10 10 10 10 10
H 1 1 1 1
I 2 2 2 2 2 2
J 4 4 4 4 4 4 4
K 5 5 5 5 5 5 5
L 7 7 7 7 7 7 7
M 3 3 3 3 3 3 3 3 3 3 3 3 3
N 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4
O 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
P 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Q 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Day--> 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

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Plan for a typical work-front

Figures inside bar chart show the amount of work to be performed each day

Activity

A 1000 1000
B 400 400 400 400 400
C 400 400 400 400 400
D 40 40 40 40 40
E 40 40 40 40 40
F 333 333 333 333 333 333
G 333 333 333 333 333 333
H 500 500 500 500
I 333 333 333 333 333 333
J 286 286 286 286 286 286 286
K 286 286 286 286 286 286 286
L 286 286 286 286 286 286 286
M 134 134 134 134 134 134 134 134 134 134 134 134 134
N 116 116 116 116 116 116 116 116 116 116 116 116 116 116 116
O 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97
P 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97
Q 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97
Day--> 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Alternative-1 : Base Case

Plan for completing all 14 work-fronts
or entire project
 Limited availability of scaffolding i.e. only 2000 sq.m was available
 MICC decided to complete all 14 fronts in sequential manner based
on availability of scaffolding.
 One work-front can be completed in 30 days.
 Second work-front can be made available immediately upon
availability of scaffolding after completion of plastering activity G.
 Hence entire project can be completed in 199 days
 13 days * 13 work-fronts + 30 days * 1 work-front

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Computation of Profit margin for Alternative-1

Key Resources and Costs

Number of scaffolding sets of

2
2,000 m each 1 set
Project duration 199 days
Project revenue INR30,000,000
Initial setup cost INR2,500,000
Scaffolding cost per set INR1,500,000
Direct labour and material cost INR25,920,300
Indirect monthly overhead cost INR67,500
Interest rate per month 1.50%

Computation of Profit margin for Alternative-1

Payment Schedule

Per Cent Time req. to Percentage of Day of

completion complete payment payment
(in days) release release
40% 80 30% 90
60% 119 50% 129
80% 159 70% 169
100% 199 100% 209

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Computation of Profit margin for Alternative-1

Computation of Fund Requirements

receipts from

Interest cost
requirement

requirement

receipt from

requirement
Scaffolding

Cumulative

Cumulative

Cumulative
standalone
Direct L+M

overhead

Payment

payment

net fund
Indirect
Setup

Fund

fund
cost

cost

cost

cost
Day

NIM

NIM
0 2,500,000 0 0 0 2,500,000 25,00,000 0 2,500,000 0
30 1,407,583 67,500 1,475,083 39,75,083 0 4,012,583 37,500
60 3,907,583 67,500 3,975,083 79,50,166 0 8,010,355 60,189
90 3,907,583 67,500 3,975,083 11,925,249 9,000,000 9,000,000 3,045,404 120,155
120 3,907,583 67,500 3,975,083 15,900,332 9,000,000 6,946,013 45,681
129 15,900,332 6,000,000 15,000,000 931,589 31,257
150 3,907,583 67,500 3,975,083 19,875,415 15,000,000 4,885,196 9,782
169 19,875,415 6,000,000 21,000,000 -1,078,176 46,409
180 3,907,583 67,500 3,975,083 23,850,497 21,000,000 2,850,497 0
185 0 0 23,850,497 21,000,000 2,857,624 7,126
199 2,474,803 42,750 2,517,553 26,368,050 21,000,000 5,388,053 20,003
209 26,368,050 9,000,000 30,000,000 -3,611,947 26,940
Total 2,500,000 0 23,420,300 447,750 26,368,050 52,736,100 30,000,000 405,043

Computation of Profit margin for Alternative-1

Particulars Amount
Additional scaffolding cost 0
Direct labour + material cost 25,920,300
Indirect overhead cost 447,750
Interest 405,043
Total cost 26,773,093
Total revenue 30,000,000
Margin 3,226,907
Margin % 10.76

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Comparison of various alternatives

EXHIBIT TN-6: COMPARISON OF VARIOUS ALTERNATIVES

Project completion
Number of parallel

scaffolding sets

Requirement of

Profit Margin*
time (in days)
(of 2000 m )
work-fronts
Alternative

additional

Remarks
2
Not viable in comparison
1 0 0 199 10.76%
with Alternative 2
2 2 1 108 10.86% Best Project Return
3 3 2 82 10.09%
4 4 3 69 9.18%
5 5 4 56 8.38%
6 6 5 56 7.26%
7 7 6 43 6.46% Not viable in comparison
8 8 7 43 with Alternative 2; higher
9 9 8 43 losses due to additional
10 10 9 43 scaffolding cost
11 11 10 43
12 12 11 43
13 13 12 43
14 14 13 30 -0.46%

Modification in Scaffolding Removal

Figures inside bar chart show the amount of work to be performed each day

Activity

A 1000 1000
B 400 400 400 400 400
C 400 400 400 400 400
D 40 40 40 40 40
E 40 40 40 40 40
F 333 333 333 333 333 333
G 333 333 333 333 333 333
H 500 500 500 500
I 333 333 333 333 333 333
J 286 286 286 286 286 286 286
K 286 286 286 286 286 286 286
L 286 286 286 286 286 286 286
M 134 134 134 134 134 134 134 134 134 134 134 134 134
N 116 116 116 116 116 116 116 116 116 116 116 116 116 116 116
O 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97
P 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97
Q 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97 97
Day--> 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

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Comparison of various alternatives

Alternative Number of parallel Requirement of Project Profit

work-fronts additional completion time margin
Scaffolding sets (in days)
(of 2000 m2)
1 0 0 157 11.38%
2 2 1 87 11.20%
3 3 2 67 10.36%
 

Thank You

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