Presented to the ​Management and Organizational Department

De La Salle University - Manila

2nd​,​ ​A.Y. ​2019 - 2020

In partial fulfillment
of the course
Quantitative Methods for Decision Making
In MSC530M

BCD Construction Company

Submitted by:

Arce, Agatta Angela F.

Chen, Hao
Dacanay, Marc Kevin
Jareño, John Paolo
Jucutan, Jennifer
Lin, Jordan
Li, Mark

Submitted to:
Dr. Enrico Cordoba

March 7, 2020
I. Background

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 BCD Construction Company is a relatively small entity which earns mostly from local

job contracts. Management agreed to send a proposal to construct a mile-long extension to the

central sewage network in a rural town that used septic tanks to this day. This project is

considered crucially important for many, as anyone who wins this offer will have an advantage

in securing a P100 million contract that will be given by the city later in the year. Taking the

project’s importance into consideration, BCD project managers are tasked to make decisions to

optimize costs and deliver the most competitive bid possible.

In accordance with common practices of construction firms in the area, BCD employs

people from union pools. There is a good possibility that the local Excavators Union would go

on a strike on the start date of the project which could adversely impact its profitability. There

was an agreement at a project management conference to use the possibility of such a strike for

contingency purposes at 80 per cent. If a strike does occur, direct costs would stay unchanged,

because the problem concerned was not that of wages; however, indirect costs would rise in

accordance with the length of the strike.

II. Statement of the Problem

What recommendation should the project manager make regarding the number of shifts

to be employed and the exact bid amount for the sewerage project?

III. Objectives of the Case Study

A. To determine the optimal number of shifts that would result in the lowest cost for the

project, which, in turn, would yield a competitive bid for BCD Construction Company.

B. To determine the exact bid to be submitted by BCD Construction Company to the

municipal government.

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IV. Areas of Consideration and Methodology

A. Point of View

The group will take the point of view of the BCD Construction Company’s

project manager for the main sewer system extension project.

B. Methodology

The group utilized Program Evaluation Review Technique / Critical Path Method

(PERT/CPM) to compute for the total project days/completion date and total project

costs.

C. Project Estimates and Strike Probability

Annex 1 shows the time and cost estimates of BCD’s engineers for the project.

Below are estimates for strike probability:

V. Analysis

A. Project Activities and Precedence Table

The trunk sewer extension is to be laid in a tunnel for 1/3 its length; the remaining 2/3 is

to be constructed in trenches. To build the tunnel, a primary shaft must be excavated first, then

the secondary shafts can be driven and the tunnel can be dug simultaneously. The trench is to be

started at the same time as the primary shaft. Another crew of workers follows the trench

workers, laying pipes, pouring concrete, and refilling trenches as far as they have been

excavated. The excavators lose no time as a result of this follow up. A third group would be

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performing a similar function in the tunnel. Based on the above, we came up with the precedence

table below:

Activity Description Immediate Predecessor

A Move in machinery/equipment -
B Excavate primary shaft A
C Excavate secondary shafts B
D Excavate trenches A
E Excavate tunnel B
F Backfill (trenches only) I
G Pipe-laying in trenches D
H Pipe-laying in tunnel E
I Pour concrete in trenches G
J Pour concrete in tunnel C, H
K Landscape F, J
L Move out K

Below is our network diagram based on the precedence table above:

B. Critical Path Identification

Based on our analysis, the group has determined the critical path as ​A - D - G - I - F - K -

L regardless of the number of shifts to be selected. The critical path is illustrated as follows:

(Please see Annex 2 for the detailed analysis per number of shifts)​:

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Below is the estimated total number of working days per shift based on the identified critical

path:

No. of days
Activity Description
One Shift Two Shifts Three Shifts

A Move in machinery/equipment 12 6 4

D Excavate trenches 300 150 100

G Pipe-laying in trenches 50 25 17

I Pour concrete in trenches 70 35 25

F Backfill (trenches only) 50 25 17

K Landscape 10 8 6

L Move out 6 3 2

Total 498 252 171

C. Project Costing

1. Computation of Direct Costs

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 One Shift Two Shifts Three Shifts
ACTIVITY
Days Cost (P) Days Cost (P) Days Cost (P)
A Move in machinery/equipment 12 3,000 6 3,300 4 3,600
B Excavate primary shaft 12 6,950 12 6,950 12 6,950
C Excavate secondary shafts 60 6,250 24 6,600 12 6,950
D Excavate trenches 300 33,700 150 42,500 100 44,700
E Excavate tunnel 305 36,150 155 39,100 105 40,000
F Backfill (trenches only) 50 1,000 25 1,500 17 2,000
G Pipe-laying in trenches 50 7,500 25 8,200 17 8,900
H Pipe-laying in tunnel 46 5,500 25 5,700 16 6,000
I Pour concrete in trenches 70 11,400 35 11,650 25 11,850
J Pour concrete in tunnel 60 11,000 30 11,250 20 11,500
K Landscape 10 2,000 8 2,900 6 3,000
L Move out 6 500 3 750 2 1,000
Total Direct Cost 124,950 140,400 146,450

2. Computation of Indirect Costs

Since there is a strong chance that the local Excavators Union will strike on the project’s

inception date, we also computed for the additional indirect costs during strike days. See below

detailed computation for normal operations and during strike days:

2.1 Normal Operations

One Shift Two Shifts Three Shifts

Critical path (in days) 498 252 171
Indirect cost per day 140 160 180
Total Indirect Costs 69,720 40,320 30,780

2.2 Additional Indirect Costs During Strike Days

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Length of Strike Days with
Probability
(Days) Strike
20 25% 5
30 25% 7.5
40 50% 20
Total 32.5
80% Consensus Rate 26 Days

One Shift Two Shifts Three Shifts

Days in Strike 26 26 26
Cost per Day 140 160 180
Additional Indirect Costs 3,640 4,160 4,680

3. Computation of General and Administrative Costs

Per the project estimates, general and administrative costs are 40% of the sum of

direct and indirect costs. See below for the detailed computation:

3.1 General and Administrative Costs Without Strike

One Shift Two Shifts Three Shifts

Direct Costs 124,950 140,400 146,450
Indirect Costs 69,720 40,320 30,780
Total Costs 194,670 180,720 177,230
G&A Percentage 40% 40% 40%
Total G&A 77,868 72,288 70,892

3.2 General and Administrative Costs With Strike

One Shift Two Shifts Three Shifts

Direct Costs 124,950 140,400 146,450

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 Indirect Costs 69,720 40,320 30,780
Strike Costs 3,640 4,160 4,680
Total Costs 198,310 184,880 181,910
G&A Percentage 40% 40% 40%
Total G&A 79,324 73,952 72,764

4. Total Project Costs

4.1 Total Project Costs Without Strike

One Shift Two Shifts Three Shifts

Direct Costs 124,950 140,400 146,450
Indirect Costs 69,720 40,320 30,780
G&A Expenses 77,868 72,288 70,892
Total Costs 272,538 253,008 248,122

4.2 Total Project Costs With Strike

One Shift Two Shifts Three Shifts

Direct Costs 124,950 140,400 146,450
Indirect Costs 73,360 44,480 35,460
G&A Expenses 79,324 73,952 72,764
Total Costs 277,634 258,832 254,674

VI. Alternative Courses of Action (ACA)

To determine the exact bid to be submitted to the municipal government, we will evaluate

the following ACAs which considers the high chance that a strike will happen:

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 One Shift Two Shifts Three Shifts
Direct Costs 124,950 140,400 146,450
Indirect Costs 73,360 44,480 35,460
G&A Expenses 79,324 73,952 72,764
Total Costs 277,634 258,832 254,674
Target Margin (10% of cost) 27,763 25,883 25,467
Bid Price 305,397.40 284,715.20 280,141.40
Estimated No. of Days to
498 252 171
Complete

VII. Choosing the Best Alternative Course of Action

a. Decision Criteria

Decision criteria are the items which BCD Company should view as important to

determine the exact bid to be submitted to the municipal government. The following criteria

were used by the proponents in evaluating the ACAs:

1. Total project cost considering the high percentage that a strike will occur (25%)

2. Determined bid price to be submitted (25%)

3. Project Length - Total estimated number of days to complete the project (25%)

4. Total profit (25%)

b. Evaluation of Alternative Courses of Action (ACA)

ACA 1 ACA 2 ACA 3

Decision Criteria Weight
1 Shift 2 Shifts 3 Shifts

Project Cost
25% 12.50% 25% 25%
Higher than the average of all three ACAs - 12.5%
Lower - 25%
Bid Price
25% 12.50% 25% 25%

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 Higher than the average of all three ACAs - 12.5%
Lower - 25%
Project Length

Longest - 8.33% 25% 8.33% 16.66% 25%

Middle - 16.66%
Shortest - 25%
Profit
25% 25% 12.50% 12.50%
Lower than the average of all three ACAs - 12.5%
Higher - 25%

TOTAL 100% 58% 79% 88%

The third ACA (Three shifts) gained the highest score, and is, therefore, the recommendation of

the group.

VIII. Conclusion and Recommendation

After carefully understanding and analyzing the case of BCD Construction Company, the

group concludes that the third alternative course of action would be the overall best way to

implement this project. Consequently, the group also concluded that the exact bid price to be

submitted is Php 280,141.40. The group employed the PERT CPM model and found that,

regardless of the number of shifts selected, the critical path of the project is ​A - D - G - I - F -

K - L. From the critical path, the group determined that it would take 498, 252, and 171 days to

complete the project through employing one, two and three shifts, respectively. Subsequently,

the group was able to derive the the total costs of the different work shift alternatives by

considering direct costs, indirect costs, general administrative and strike costs. The three shift

alternative resulted in the lowest cost at Php 254,674. Lastly, the group was able to select the

best alternative course of action with the help of a decision criteria that takes into account the

total cost, projected bid price, project length and profit. The third alternative emerged as the

overall best.

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 Given these points, the group, being the assigned project manager of this crucial project,

recommend the management of BCD company to submit an exact bid of Php 280,141.40 to the

prospective municipal client. The project manager also recommends employing a three shift

schedule, should the company win and bag the said project.

Annex 1

Time and Cost Estimates

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 Annex 2

Critical Path Identification per Number of Shifts

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One Shift

Two Shifts

Three Shifts

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