Master Programme

Decision Making
Project A
Due Date: Sept 12th 02:00 PM

You are working in a big construction company FCC. You are named as an Executive
manager for a large office block project.
At the moment the project is under the bidding phase and you are supposed to calculate
all the information necessary to send the bid.
Based on your extensive experience, you have formed the following table (table 1)
including tasks and information about the dependencies, durations (in weeks) and
resource needs (manpower). For example, dependency marked “11” on task 12, means
that the task 12 cannot begin before the task 11 is finished.

Problem 1:
1 - Draw an activity node diagram and then PDM diagram;
2 - Calculate the shortest duration for the project,
2 - Draw a Gantt chart (bar chart).
3 - Mark up the most important milestones (2-3), according to your opinion.

Problem 2:
1 - Draw an initial resource diagram
Now you have to take into account that the resources (manpower) are limited to
maximum of 12 persons.

Problem 3:
1 - To get the deal you are supposed to prepare a cost estimate and calculate a bidding
price for the project. FCC intends to act as a constructor, but it plans to procure some
phases of the project work from subcontractors. FCC will be totally responsible for the
project management and control. The cost estimates of various tasks and types of work
are based on the experience of FCC. Separate invitations for bids concerning the
subcontracts are not yet needed in such an early phase, since most of the work is
straightforward and simple.

FCC decides to do following tasks with its own resources:

 Administration and Management 20.000 €/month
 Planning, Design and Engineering 100.000 €
 Purchasing 30.000 €
 Building and Interior construction 15 M€
FCC decides to subcontract following tasks:
 Land construction 1200m² price: 1500 €/m²
 Groundwork fixed price (0,3 M€) + 800 piling pieces height: 10m price:120 €/m
 Electrical works 2,5 km price: 300 €/m
 Piping construction 1,4 km price: 1550 €/m
 Yard works 400m² price: 105 €/m²

All costs are estimated without VAT (Value added tax) and also the price of the final bid
is without VAT. Since inflation is insignificant and the price level of construction
materials and services is forecasted to stay very stable, the cost estimate does not address
cost escalation or inflation in any way and all costs are handled at their face value
regardless of the time of occurrence. Remember that FCC hopes to have a 25% profit
margin for this contract.

Problem 4:
Calculate a cost estimate based on the information given. Include also the bidding price
in your calculation.
After few weeks of considerations your bid was accepted. After that you sent bid requests
to several suppliers and you have now selected your suppliers, with the following bid
prices.
 Land construction 1.75 M€
 Groundwork 1.6 M€
 Electrical works 0.97 M€
 Piping construction 2.4 M€
 Yard works 40 k€

Problem 5:
Re-calculate the cost estimate after receiving final bids from the suppliers, and a re-
calculate your current profit margin.
Project progress measurement
After the great performance in managing your office block-constructing project, you were
selected to serve as a project manager for a one of the most debated public projects in
Finland: The extension of the metro towards West, to Espoo. It took several years to plan
the project, to get all the permissions needed, and to get the approval of citizens. When
the financing was settled, the project was finally started 24 months ago. Now it is again
time to monitor the current situation of the project. You have decided to use Earned
Value method in your calculations. Since your former projects succeeded well, FCC
decided to use an incentive type of contract with an estimated contract value of 493M€.
The incentive type of contract means in this case that the FCC’s provision is reduced by a
sum proportional (30%) to the cost overrun. Furthermore, on the other hand, if getting
under budget FCC receives extra bonuses. In other words, the clients (cities of Helsinki
and Espoo) and the contractor (FCC) share the risk in the project. Since the cities have
already ordered new metro trains and the costs of possible delays of the project are
remarkable, a penalty of 5 M€/month for each month delayed was agreed between the
parties. The unpredictable cost item in your calculation is a contingency for costs that
can’t be predicted.
The project budget is presented in table 1. FCC will get the constructor's provision when
it finishes the project. All the figures presented in the following tables describe the
situation at the end of each month specified in the month column.

You have also collected information about the actual costs. Actual costs are presented in
the table
2.
You have also the completeness percentages from your subproject managers. The
percentage completed is measured at the end of the respective month. Each month’s
results are therefore cumulative. You trust on your subcontractors’ ability to estimate the
values. The most recent reports are summarized in table 3.

On the month 19, you had to spend supplementary 7,5 M€ because you accidentally
broke the district heating network. At the moment there are not other unpredictable costs
that you know about. Yet, you decide to keep the rest of the budgeted unpredictable costs
in your calculations just in case.
Problem 1:
1 - Draw a picture using any drawing tools illustrating ACWP-, BCWS- and BCWP-
curves (for the whole project).
2 - Draw also a picture of the development of CV and SV.
3 - Calculate the necessary variances and indexes, which, according to your
understanding, exhibit the truthful state of the project progress and performance.
4 - Describe briefly the situation and the development of the project bearing in mind the
numbers you counted.
As you can notice, the rail substructure has not progressed exactly as planned. Because of
the dependencies between the tasks, the rail superstructure and installation cannot be
started before substructure is completed. The subcontractor promises to finish the rail
substructure in the end of month 27. You have thoroughly checked their plans and think
their promise is trustworthy.

Problem 2:
1 - Does this change your perception of the project’s progress and if yes, how?
2 - In month 22 you received an announcement from your subcontractor of
superstructure. They have obtained a better contract and they want to break the one with
you. When checking the contract you had made with them, you found out that they have
to pay a penalty of 1 000 000 €.
Now you have to find out new contractor. With some contacts, you found out that there
are two companies able to do the job. You sent them requests for bids last week and
received their bids yesterday.
First candidate, Pro Construction (PC) is offering a cost reimbursable contract for which
they have estimated the costs to be 20M€. The other candidate, YoYo Constructor (YYC)
on its behalf suggests a fixed price contract of 28M€. PC was the subcontractor of
tunnels’ construction and finishing. You can presume that PC’s performance will be at
the same level as in that subproject.
Both companies promise to fulfill the original schedule, i.e. to do superstructure in 12
months.
Notice also that your rail installation subcontractor, Railing, has announced that its
subproject duration can be shortened by working overtime. The initial length of 15
months could be cut down to 12 months. Yet, this would cost you extra 1 M€ for each
month during the 12-month period.

Problem 3:
1 - You are now supposed to make decisions based on you considerations and the
information given above. Explain the reasoning behind your decisions clearly, and
calculate a new forecast of the project total cost and profit, and compare the new profit
estimate with the originally planned one.
Problem 4:
Write a short and well-structured document (max one A4) highlighting the main
characteristics of a good reporting system, the ways to gather information and different
reporting types.

Instructions:
In order to meet these assignment requirements, please make sure to comply with the
following steps:
1- Project should be completed in group between 3 – 5 members
2- Submitting title sheet contains; name of the project, students names and ID
numbers, and the date.
3- All projects should be submitted electronically using MS-Word
4- All drawings should be done either by MS-Visio, MS-Excel or MS-Project
5- Late projects with an acceptable and excused delay shall be accepted, but it will
be reflected negatively on the overall grade of the project.
6- Students should work in team sprit avoiding any conflicts