MODULE 6

Assignment 6
Learning outcomes:

LO5: Apply project compression strategies to reduce either time or cost, or both.

LO7: Calculate costs and budget variances associated with balancing techniques and
compression strategies.

Name:
1. Instructions and guidelines (Read carefully!)
Instructions
1. Insert your full name and surname in the space provided above. Save the file as:
Initials_Surname_A6 – e.g. L_Smith_A6. NB: Please ensure that you use the name that
appears in your student profile on the Online Learning Campus (OLC).

2. Write all your answers in this document. There is an instruction that says, “Start writing
here:” under each question. Please type your answer on the line immediately below this
prompt or, if there is a numbered list for multiple points, then answer each point on the
same line as each number in the list. Do not delete “Start writing here:”!

3. Submit your assignment in Microsoft Word only. No other file types will be accepted.

4. Do not delete the plagiarism declaration or the assignment instructions and guidelines.
They must remain on your assignment when you submit.

PLEASE NOTE: Plagiarism cases will be penalised according to the Terms and Conditions for
Students.

IMPORTANT NOTICE: Please ensure that you have checked your course calendar for the due
date for this assignment.

Guidelines
1. There are 12 pages and 2 questions in this assignment.

2. Make sure that you have carefully read and fully understood the questions before
answering them. Answer the questions fully but concisely and as directly as possible.
Follow all specific instructions for individual questions (e. g. “list”, “in point form”).

3. Answer all questions in your own words. Do not copy any text from the notes, readings,
or other sources. The assignment must be your own work.

Plagiarism declaration:

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 1. I know that plagiarism is wrong. Plagiarism is to use another’s work and pretend
that it is one’s own.

2. This assignment is my own work.

3. I have not allowed, and will not allow, anyone to copy my work with the intention
of passing it off as his or her own work.

4. I acknowledge that copying someone else’s assignment (or part of it) is wrong, and
declare that my assignments are my own work.

2. Mark allocation
Each question receives a mark allocation. However, you will only receive a final percentage
mark and will not be given individual marks for each question. The mark allocation is there
to show you the weighting and length of each question.

Question 1: Crashing the schedule 15

Question 2: Revising the budget 15

TOTAL 30

3. Assignment questions
Assignment instructions
Complete Questions 1 and 2 in this document. Make sure that you use your own words
when completing this assignment. Ensure that you have read the notes for Modules 1
through 6 before you complete this assignment.

Complete the entire assignment in this document. All questions in this assignment are based
on the fictional scenario described in Assignments 2 and 4 and expanded upon below.

Note that your answers for previous assignments are to be ignored; only the scenario given
to you in the grey scenario blocks is to be referenced in this assignment.

Do not change or edit any part of this document’s formatting (e.g. font size, font colour,
headers and footers, etc.). The formatting should remain as is.

Scenario
You’ve arrived at work on Tuesday morning, 16th May 2017. Everyone is under a lot of stress.

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DTI’s first payment was received much later than anticipated, which caused the installation
at the first community to start only last week. There are two problems that Louise wants you
to work on, but first, some relevant background information to the situation:

The sub-project plan for each community, which you helped by creating the WBS (in
Assignment 4), was designed to follow the sequence of activities shown in Figure 1 below.
The data in each activity, from top to bottom, is the activity ID, the activity description and
the activity’s duration in days.

2 3
Organise Deliver training
logistics workshops
5 5 5
Hand over all
units
4 2 6
Install units Close out sub-
12 project
1

1
Plan & control
the sub-project
7

Figure 1: Activity dependencies of the community installation sub-projects.

Each community site’s sub-project will span four weeks. The first week entails receiving the
units from the factory, getting training materials printed and all equipment transported to
site. Training and installation happen from Week 2. Two two-man teams will be able to
install at least ten units per day, while training will be given to roughly 25 people per day by
the trainer.

Because of the schedule constraint in the project, we’ve needed to fast track the community
sub-projects so that the sub-projects will overlap each other. We had originally planned for
the first community’s sub-project to be a pilot and run on its own from 13 th March to 7th
April. We then intended a gap in the second week of April to be used to implement our
learning so that risks can be mitigated (or issues solved faster) in subsequent communities’
installations.

The second sub-project was intended to start on 17 th April and, thereafter, one community
sub-project would commence every successive week so that the 25 th community’s sub-
project would be closed out by 20 th October 2017, well ahead of the contractual deadline of
30 November. But things aren’t going according to plan.

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Our technicians started their first week of installations yesterday. On arriving at site, they
discovered that their specialised tools were stolen when the community hall, in which they
were being stored, was broken into during the weekend.

Fortunately, our pilot community is only 200km outside of Cape Town, so we lost less than a
day to get replacement tools to site and the technicians and trainer could begin working
before the end of the day. The technicians working a little overtime, for a few nights, will
mitigate the schedule delay. The impact of this issue is limited to the R24,500 cost of the
replacement tools, overtime, and the transport (including the 10% mark up on the cost of
these as per the programme’s budgeting policy).

Unrelated to that, a few communities are proving troublesome. Militant factions in each
troublesome community have threatened to sabotage our work as part of their
“ungovernable” campaign. Teresa and Jacky have successfully resolved these issues for now,
having mediated between the factions and the political groups who are officially in power.
This extra effort and the trips to the communities have added more costs than we’d
provided for in the public relations and external stakeholder liaison budget. The
programme’s plans have not been revised with these extra activities and the contingency
reserve will need to absorb this cost and the cost of replacing the stolen tools.

As a precaution against further theft losses, we plan to hire 24-hour security services to
guard our temporary “warehouses” at the current community and all other communities.
Compared to the cost of security services, fixing the problem of the stolen tools was minor:
security costs will add R51,450, including the 10% mark up, per community to the
programme’s budget.

We’ve also lost productivity in technicians and trainers unable to do their work, having been
booked for the first communities’ activities but not being able to work on those activities
due to DTI’s delay in paying the first installment. Because they’re all contracted specifically
for the programme and not permanently employed, we’ve compensated them in the form of
retrospective stand-by allowances in lieu of some of what they would have been paid for the
actual work. They will still be paid in full, however, when they eventually fulfil their allocated
activities. Therefore, the stand-by allowances, totalling R21,223 (also including our 10%
mark up) is another addition to the programme’s actual costs, which Louise will draw from
the programme’s contingency reserve.

Thankfully, we’ve negotiated with DTI and they will increase their grant to fully cover the
costs of the security and stand-by allowances. Louise suspects the people at DTI feel bad
about having caused the delays after all the administrative red tape behind their first
installment.

So, that’s one set of problems solved. The last big issue is that the delay has affected all
other activities on the critical path and, if we don’t crash the schedule somehow, we will
overshoot our delivery deadline of 30 November by three weeks. You’ve heard a rumour
that the installation of our power systems is a pawn in a political game in the build up to the
upcoming government elections. Apparently, this is why DTI is denying all our requests to
push out the 30 November deadline.

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The schedule is clearly the top priority in the programme, meaning we should brace
ourselves for some additional costs to recover the schedule, though our deliverable and
quality targets will remain unchanged. After Louise consulted Anton, you, and the other
PMs, she decided that the two best methods to shorten the critical path are to:

1. Eliminate the lag week after the first community’s sub-project and bring forward the
second community’s sub-project by two weeks; and

2. Ask the technicians at the last two communities to work overtime so that, instead of
installing five units per day per team, they would install seven, which would shorten
installation, handover, and close out from three weeks to two.

Because overtime rates are paid at 1½ times normal pay rates, the proposed overtime for
the last two sub-projects will add R34,000 (again including the 10% mark up) to the
programme’s actual costs. Teresa had discussed the option of overtime for installation with
Bill a few weeks ago and assured Louise that Bill’s foundation will cover the additional cost in
full.

These proposed changes to the schedule and daily productivity of the last two sub-projects
will bring the programme’s scheduled delivery end date to Friday 24 th November. After
handing over the final unit, the programme can be closed out, and this has no strict deadline
like the delivery deadline, other than to ensure the team is de-mobilised and final payments
from sponsors are expedited to free LES’s resources and management attention for new
work.

To implement all these major changes to the budget and the schedule, they must be
approved by the change committee, who will convene this afternoon in an emergency
change control meeting requested by Louise. These change requests are on the meeting
agenda:

1. Increase the budget by R51,450 to hire security for the storage areas in each community;
approving this should be a formality because of DTI’s commitment to cover this cost in
full;

2. Bring forward the second project’s start by two weeks; and

3. Have the technicians work overtime in the last two projects, which should also be a mere
formality to get approved because of Bill’s commitment to cover in full.

To prepare for the emergency change control meeting and, because the programme’s
financial administration is in your job portfolio, Louise has asked you to calculate the
programme’s revised budget for her to present at the meeting. You confirmed your
understanding with Louise of LES’s financial policies regarding variance calculations, namely
that cost overruns and budget decreases are each shown as negatives variances. Louise also
wants you to prepare the crash table for crashing the last two sub-projects’ schedules.

Lastly, she’s been impressed by your improvements to efficiency and the systems used in the
project office – perhaps her misgivings of that smart-sounding online project management

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course you keep talking about aren’t merited after all. Because you’ve introduced several
positive changes in the business, Louise wants to pick your brain for some creative ideas on
alternative methods to assure the schedule meets the deadline.

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Question 1
1.1 Complete the crash table below with the following information:

1. The data pertains to the activities in the community sub-project network diagram
depicted in Figure 1 on Page 4. Costs have been sourced from the project budget
and rounded to the nearest hundred.

2. You must calculate the daily crash cost for each activity.

3. Once you have done this, prioritise the activities according to their daily crash cost
values, i.e. the activity with the lowest crash cost will be Priority 1, the next lowest
daily crash cost will be Priority 2, etc. Note that non-critical activities should not be
prioritised for crashing.

4. Activity 6 cannot be compressed to less than 1 day, i.e. its duration is optimal.

5. You need to reference the network diagram to establish whether or not crashing
each activity will yield any schedule benefits.

See Table 1 and the related notes in Module 6 for an example.

Note: Please do not change the table’s properties, e.g. font size, table dimensions, etc.

ID Current Crashed Daily crash cost Priority

Duration Cost Duration Cost

1 7 22,800 5 26,200

2 5 150,600 4 178,200

3 5 35,600 3 56,400

4 12 37,800 7 54,800

5 2 3,200 1 9,100

6 1 1,800 - - - -

1.2 If the second sub-project’s start is not brought earlier by two weeks and overtime and
afterhours work are forbidden for the programme, what else could Louise propose to meet
the deadline of 30 November and satisfy all other terms of the big deal? In other words, the
contract is immutable and the programme must be balanced at the project level. Briefly
explain how this might work with reference to the scenario. (Max. 3 lines)

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Start writing here:

1.3 Describe two positive and two negative effects of working overtime. Be specific. Your
answers don’t have to be limited to what is given in the scenario, but they must be workable
in the context of the scenario of the installations taking place in communities’ homes. (Max.
2 lines per effect)

Positive:

Start writing here:

1.

2.

Negative:

Start writing here:

1.

2.

1.4 What negative consequences could result from activity re-allocation? Give two possible
examples that could exist in the scenario, even if they are not explicit in the scenario and
you make them up. (Max. 6 lines in total for both scenarios and not 6 lines each)

Start writing here:

1.

2.

1.5 For any two activities in a project to be fast tracked in relation to each other, there are
two practical conditions that must both be satisfied. If neither of these conditions are met,
then the activities can’t be executed concurrently. Name these two conditions and, with
reference to the scenario, create an example for each condition to demonstrate your
understanding of their practical application. Be sure to focus on the fast tracking conditions
for two activities and not two projects. (Max. 4 lines per condition)

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Start writing here:

1.

2.

1.6 Give an example of potential scope creep in the programme and explain how it would
affect the project. Your answers must relate to the scenario. (Max. 3 lines)

Start writing here:

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Question 2
2.1 Complete all empty cells in the programme’s budget tables below using the information
already provided:

1. Use the top table to calculate the actual cost versus the budgeted cost of the
planning project, which is now complete.

2. Use the bottom table to calculate the revised budget variance and budget variance
percent for the open projects as well as all empty cells for the reserve and total
rows.

3. For all variance percent values, show precision to two decimals, i.e. round off to two
decimal places.

4. The reserve represents the difference between the project’s selling price budget and
the cost of the four projects, i.e. this is the possible surplus that can be earned as
gross profit from the project.

Note:

For Question 2.1, write only in the table below. Please do not change the table’s properties,
e.g. font size, table dimensions etc. Do not add rows.

Revised
Budgeted Actual
Project budget Cost variance CV%
cost cost
(BAC*)
Planning 195,143 N/A 277,800

Revised
Budgeted Actual Budget
Project budget BV%
cost cost variance
(BAC*)
Procurement 12,303,047 12,507,981 N/A

Execution 4,140,938 5,500,250 N/A

Comms &
585,428 598,770 N/A
control
Reserve 861,228 592,559 N/A

Total 18,085,784 277,800

* BAC: Budget at completion.

NB: the budget for the planning project was not revised.

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NB: the actual cost values for the four remaining projects are not yet known.

2.2 What is the remaining budget to complete the project? Show your calculations. (Max. 4
lines)

Start writing here:

2.3 LES Holdings’ support departments provide various “back-office” services for the project.
For example, invoices from suppliers for programme costs are verified and approved at the
project office before being sent to the finance team for payment to the supplier – the
payment itself is a back-office support function. In future projects like this, should the cost of
the finance support function just described (and other support functions’ costs like HR, IT,
etc.) be included or excluded from this type of project?

Motivate your answer. This question is not about outsourcing these functions or including
these functions within the project team; it is asking only whether the costs of HR, IT and
bookkeeping services should be included in projects like this or if they should be borne as
overhead services by LES Holdings. (Max. 3 lines)

Start writing here:

2.4 If DTI and Eskom were to unexpectedly allow the deadline to be extended, how might
this help reduce the budgeted costs? (Max. 3 lines)

Start writing here:

2.5 If DTI and Eskom were to unexpectedly allow one or more of the troublesome
communities to be omitted from the programme, how might this adversely affect (i.e.
negatively impact) the programme’s cost and revenue budgets, i.e. the programme’s
profitability? (Max. 3 lines)

Start writing here:

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