Sharon Construction Corpor Corporation ation Source: Source Meredith & Mantel
Situation Overhead
cost of $500 per week for any delay after 48 weeks
Penalty
of $15,000 per week if project takes more than 52 weeks
Possible
Labour Strike in December
Possible Cold December Probability 0.50 0.35 0.15
Duration 0 weeks 8 weeks 12 weeks
Probability 0.333 0.667 E(x)
Cost of Hea eatting $500 per week $0 per week $167 per week
Alternatives
1. Expedite seat gallery supports 2. Expedite seat gallery supports and filling of the field 3. Expedite the roofing 4. Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution 5. Do nothing
Analysis
of Baseline & Alternative No.5
Do nothing (Tcp = 48+x weeks)
Analysis
of Alternative No.1
Expedite pouring concrete for seat gallery supports ($20,000) (activity G from 12 to 6 weeks) (Time=42)
Analysis
of Alternative No.2
Expedite pouring concrete for seat gallery supports ($20,000) (G from 12 to 6 weeks) and filling of the field ($10,000) (C from 14 to 9 weeks) (Time=42)
Analysis
of Alternative No.3
Expedite the roofing ($9,000) (activity K from 8 to 2 weeks) (Time=48)
Analysis
of Alternative No.4 with 8 Week Strike
Do nothing until December 1 st. If the cold is indeed extreme, postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution ($3,000 per week cut) (Time= 52)
Analysis of Alternative
No.4 with 12 Week Strike
Do nothing until December 1 st. If the cold is indeed extreme, postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution ($3,000 per week cut) (Time=56)
Time Analysis Project Duration Probability Strike Alternative Alternative Alternative Alternative Alternative Strike Duration 1 2 3 4 5 (x: weeks) 0.50 0 42 42 48 48 48 0.35 50 50 56 52 56 8 0.15 54 54 60 56 60 12
Cost Analysis Summary Mild December Probability Alternative Alternative Alternative Alternative Alternative Strike 1 2 3 4 5 0.50 $20,000 $30,000 $9,000 $0 $0 0.35 $21,000 $31,000 $73,000 $14,000 $64,000 0.15 $53,000 $63,000 $135,000 $76,000 $126,000
Summary Cold December Probability Alternative Alternative Alternative Alternative Alternative Strike 1 2 3 4 5 0.50 $20,000 $30,000 $9, 668 $668 $668 0.35 $21,000 $31,000 $73,000 $14,000 $64,000 0.15 $53,000 $63,000 $135,000 $76,000 $126,000
Risk Analysis
Expected Losses and Uncertainty in mild December $6 0,000 $5 0,000 $ 40,000
E(x)
$3 0,000
SD(x)
$ 20,000 $1 0,000 $0 Alternative Alternative Alternative Alternative Alternative
1
2
3
4
5
Risk Analysis
Expected Losses and Uncertainty in cold December $6 0,000 $5 0,000 $40,000
E(x)
$3 0,000
SD(x)
$20,000 $1 0,000 $0 Alternative Alternative Alternative Alternative Alternative
1
2
3
4
5
Risk
Profiles
Risk Profile of losses with mild December
$140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0
Alternative 1 Alternative 2
0.15 0.35 0.5
Probabilities
Alternative 5 Alternative 4 Alternative 3 Alternative 2 Alternative 1
Alternative 3 Alternative 4 Alternative 5
Risk
Profiles
Risk Profile of losses with cold December
$140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0
Alternative 1 Alternative 2
0.15 0.35 0.5
Probabilities
Alternative 5 Alternative 4 Alternative 3 Alternative 2 Alternative 1
Alternative 3 Alternative 4 Alternative 5
Recommendation
1. A4: Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring; if a strike occurs, expedite all activities after resolution (lowest E(x)) 2. A1: Expedite seat gallery supports (second lowest E(x))
Conclusion
A1 is better than A2 and A3 if the probability/risk of a strike is considered.
A4 provides the option of speeding up the remaining tasks in case of a strike and doing nothing otherwise. This option is powerful.
A4 has a lower but a higher uncertainty (broad range of losses from $0 to $76,000) than A1. The analysis of the risk profiles will help management to select the alternative which fits the corporation s risk strategy. ¶
If the corporation is adverse to risk, it could select A1 (losses are spread out from $20,000 to $53,000). A1 has a lower uncertainty than A4.
The project duration could be a factor for the decision, if there are projects on hold due to lack of resources.
