I. II.
TITLE TITLE OF THE THE CASE CASE : TEAN TEANECK ECK CONST CONSTRUC RUCTIO TION N COM COMP PANY FACTS OF THE CASE Teaneck Teaneck is a small organization with 90% of its peso volume obtained from contracts contracts for municipal municipal work. Management decided decided to submit a bid for the construction in April of a mile-long etension etension to the main sewer s!stem in a near nearb! b! town town whic which h unti untill now now has has used used sept septic ic tanks. tanks. The The bidd biddin ing g is epected to be competitive because whoever gets this contract will have some advantage in obtaining a contract to be awarded b! the town later in the !ear worth worth about "#0 million. million. $n order order to submit the most competi competitive tive bid possib possible le the pro&e pro&ect ct manage managers rs of Teaneck eaneck decide decided d to evalu evaluate ate the alternatives of using one two or three work shifts. Table Table ' shows time and cost estimates of Teaneck(s engineers. The trun trunk k sewe sewerr eten tensi sion on is to be laid laid in a tunn tunnel el for for ')* ')* its its leng length th++ the the remaining ,)* is is to be constructed in trenches. To build the tunnel a primar! shaft must be ecavated rst then the secondar! shafts can be driven and the tunnel tunnel can be dug simultaneousl simultaneousl! !. The trench trench is to be started at the same time as the primar! primar! shaft. Another crew crew of workers workers follows the trench workers la!ing pipes pouring concrete and relling trenches as far as the! have been ecavated. ecavated. The ecavators ecavators lose no time time as a result result of this follow up. A third group group would be performing performing a similar function in the tunnel. tunnel. Teaneck(s Teaneck(s direct labor is hired from union pools. There is a strong chance that the local cavators /nion will strike on the pro&ect(s inception date which ma! seriousl! seriousl! aect its protabilit! protabilit!.. At a meeting of the pro&ect pro&ect managers there was a consensus to use 10% probabilit! of such a strike for planning planning purposes. purposes. 2ith 2ith a strike strike direct direct costs would would remain remain unchanged unchanged since the issue involved was not one of wages+ but indirect costs would accrue for the duration of the strike at the same dail! rate as indicated in Table Table '. 3eneral and administrative costs are put at 40% of the sum of direct and indirect indirect costs. 5ormall! Teaneck aims at making a prot e6ual to '0% of total costs. There was also a recognized need to develop some kind of estimate to desc descri ribe be the the prob probab abil ilit it! ! of the the stri strik ke(s e(s dura durati tion on.. 2ith ith a grea greatt deal deal of misgiving the pro&ect managers came up with the following guesses7
8ength of the strike in da!s ,0 *0 40 "robabilit! "robabilit! of a strike strike of n da!s on condition condition that a strike strike occurs 0.,# 0.,# 0.#0 ou ou are the pro&ect manager assigned. The president and his two eecutive vice-presidents have asked !ou for a detailed recommendation including the eact bid to be submitted.
One Shift Shifts TABLE
Three Shifts
A!ti"it#
$%#s
Pesos
$%#s
Pesos
$%# s
Pesos
A
Move in machiner!)e6uip ment
',
'#0000
:
':#00 0
4
'10000
;
cavate primar! shaft
',
*4<#00
',
*4<#0 0
',
*4<#00
=
cavate secondar! shafts
:0
*',#00
,4
**000 0
',
*4<000
>
cavate trenches
*00
':1#00 0
'#0
,',#0 00
'00
,,#000 0
cavate tunnel
*0#
'10<#0 0
'##
'9##0 00
'0#
,00000 0
?
;ackll @trenches onl!
#0
#0000
,#
<#000
'<
'00000
3
"ipela!ing in trenches
#0
*<#000
,#
4'000 0
'<
44#000
"ipela!ing in tunnel
#0
,<#000
,#
,1#00 0
'#
*00000
"our concrete concrete in trenches
<0
#<0000
*#
#1,#0 0
,#
#9,#00
B C
Two
D
"our concrete in tunnel
:0
##0000
*0
#:,#0 0
,0
#<#000
8
8andscape
'0
'00000
1
'4#00 0
:
'#0000
M
Move out
#
,#000
*
*<#00
,
#0000
Tot%& In'ire!t Costs P-)***+'%#
P()***+'%#
P,)***+'%#
III. STATEMENT OF THE PROBLEM As pro&ect manager submit a detailed recommendation including the eact bid for the sewer etension pro&ect.
I. An%&#sis ;ased on the details provided in the case the following table showed the precedence of the activities7
A!ti"it# $es!ri/tion
Pre'e!essor
A
Move in machiner!)e6uipment
5one
;
cavate primar! shaft
A
=
cavate secondar! shafts
;
>
cavate trenches
A
cavate Tunnel
;
?
;ackll @trenches onl!
C
3
"ipela!ing in trenches
>
B
"ipela!ing in tunnel
C
"our concrete concrete in trenches trenches
3
D
"our concrete in tunnel
B
A!ti"it#
8
8andscape
?D
M
Move Eut
8
$n su summ mmar ar! ! the the acti activi vit! t! sh shal alll star startt with with the the move moveme ment nt of the the machiner! or e6uipment in the site and shall be followed b! the ecavation of the primar! shafts and trenches. Then the secondar! shafts and tunnel ecav ecavati ations ons will will follow follow.. Ence Ence ecav ecavati ations ons are are comple completed ted the pipela pipela!i !ing ng activities for the trenches and tunnels shall proceed. =oncretes will then be poured in trenches and tunnel and backlling will proceed after. The workers can now start the landscaping and once done the team can nall! move out and will signal the end of the pro&ect. ,. CRITICAL PATH I$ENTIFICATION
A. 0%ntt 0%ntt Ch%rts Ch%rts $n order to identif! the critical path the above precedence table shall be plotted in MF "ro&ect to create the 3antt =harts of the * dierent shifting strategies7
One Shift
$t will take 1-( '%#s to nish the pro&ect using ' shift onl!. /sing MF "ro&ect we have identied the critical path @in red as activities A 2 $ 2 F 2 0 2 3 2 L 2 M.
Two Shifts
$t will take take 454 '%#s to nish the pro&ect using two shifts. /sing MF "ro&ect we have identied the critical path @in red as activities A 2 $ 2 F 2 0 2 3 2 L 2 M.
Three Shifts
$t will take take ( '%#s to nish the pro&ect using two shifts. /sing MF "ro&ect we have identied the critical path @in red as activities A 2 $ 2 F 2 0 2 3 2 L 2 M. ;ased on the above data we came up with the same critical path @ A 2 $ 2 F 2 0 2 3 2 L 2 M regar regardle dless ss of the shift shift strate strateg! g!.. ;elow ;elow is the summarized table of the total number of da!s based on the critical path7
A!ti"i t#
$es!ri/tion
One Shift
Two Shifts
Three Shifts
A
Move in machiner!)e6uipmen
',
:
4
t
$
cavate trenches
*00
'#0
'00
F
;ackll @trenches onl!
#0
,#
'<
0
"ipela!ing "ipela!ing in trenches
#0
,#
'<
3
"our concrete in trenches
<0
*#
,#
L
8andscape
'0
1
:
M
Move out
#
*
,
1-( '%#s
454 '%#s
( '%#s
Tot%& $%#s Therefore Therefore the fastest wa! to nish the &ob is to emplo! three shifts with onl! ( '%#s based on the critical path.
B. A!ti"it# on No'e 6AON7 One Shift
Two Shifts
Three Shifts
I. ALTERNATIE COURSES OF ACTION In order to identify the possible bids, we shall present 2 alternatives: 1. Calculate all costs for operations and compare costing per shift strategy
normal
and
with
strike
A. $ire!t $ire!t Costs Costs A!ti"it#
Pre'e One Shift !esso $%# $ire!t r s Cost
Two Shifts $% #s
$ire!t Cost
Three Shifts $%#s
$ire!t Cost
A
Move in machiner !)e6uipm ent
5one
',
'#0000
:
':#000
4
'10000
B
cavate primar! shaft
A
',
*4<#00
',
*4<#00
',
*4<#00
C
cavate secondar ! shafts
;
:0
*',#00
,4
**0000
',
*4<000
$
cavate trenches
A
*00
':1#0 00
'# 0
,',#0 00
'00
,,#00 00
E
cavate Tunnel Tunnel
;
*0#
'10<# 00
'# #
'9##0 00
'0#
,0000 00
F
;ackll @trenches onl!
C
#0
#0000
,#
<#000
'<
'00000
0
"ipela!in g in trenches
>
#0
*<#000
,#
4'0000
'<
44#000
H
"ipela!in g in tunnel
=
#0
,<#000
,#
,1#000
'#
*00000
3
"our concrete in trenches
3
<0
#<0000
*#
#1,#00
,#
#9,#00
K
"our concrete in tunnel
B
:0
##0000
*0
#:,#00
,0
#<#000
L
8andscap e
?D
'0
'00000
1
'4#000
:
'#0000
M
Move Eut
8
#
,#000
*
*<#00
,
#0000
Tot%& $ire!t Costs
8)41()5 **
()*4*)* **
()99()* **
B. In'ire!t Costs $n the given it was stated that there is an 10% probabilit! that a strike will occur since manpower is hired from union pools which will result to
accrued indirect costs for the duration of the strike. Therefore in computing the indirect costs we shall consider the following7 a. indirect indirect costs costs for for norma normall operation operations s b. indirect indirect costs costs in the event event of strik strike e
B. In'ire!t Cost for Nor%& O/er%tions /sing the critical path we shall determine the total indirect costs of each shifting strateg!7
One Shift
Two Shifts
Three Shifts
=ritical "ath >a!s
49<
,#,
'<'
=ost per da!
<000
1000
9000
Tot%& In'ire!t Cost
9)1(-)***
4)*8)***
)59-)** *
B.4 In'ire!t Cost $;rin< Stri=e ;efore we shall compute for the total indirect cost we needed to determine the number of da!s the strike will occur based on the given probabilit!7
Len
|
Pro>%>i& it#
$%#s with Stri=e
,0
0.,#
#
*0
0.,#
<.#
40
0.#
,0
Tot%&
94.5
,*? Pro>%>i&it#
48
The number of da!s with strike strike based on probabilit! is 48 '%#s.
One Shift
Two Shifts
Three
Shifts >a!s with Ftrike
,:
,:
,:
=ost per da!
<000
1000
9000
Tot%& In'ire!t Cost
,4)***
4*,)***
491)***
C. A'in Costs As stated in the case admin costs will be the 40% of the total amount of the direct and indirect cost.
C. @itho;t Stri=e One Shift
Two Shifts
Three Shifts
$ire!t Costs
:,4<#00
<0,0000
<**<000
In'ire!t Costs
*4<9000
,0':000
'#*9000
Per!ent%
0.40
0.40
0.40
0ener%& A'inistr%ti"e A'inistr%ti"e Costs
9),-*)8**
9)81)1**
9)55*)1**
One Shift
Two Shifts
Three Shifts
$ire!t Costs
:,4<#00
<0,0000
<**<000
In'ire!t Costs for Nor%& O/er%tions
*4<9000
,0':000
'#*9000
In'ire!t Costs ';e to Stri=e
'1,000
,01000
,*4000
Per!ent%
0.40
0.40
0.40
0ener%& A'inistr%ti"e A'inistr%ti"e Costs
9)-89)1**
9)8-()8**
9)811)***
C.4 @ith Stri=e
Summary of costs:
With the expected 10% profit, the following shall be the summary of all costs and the possible bid price based on the individual shifting strategy:
One Cost T#/e Shift :,4<#0 >irect =osts 0 $ndirect =osts for 5ormal *4<900 Eperations 0 $ndirect =osts due to Ftrike '1,000 Administration =ost for *190:0 5ormal Eps 0 Administration =ost during *9:*40 Ftrike 0 '*:'<' "rot for 5ormal Eps 0 '*1<'9 "rot during Ftrike 0 1)-(,) Bi' Pri!e for Nor%& O/s ,* 5)45-) Bi' Pri!e with Stri=e *-*
Two Three Shifts Shifts <0,000 <**<00 0 0 ,0':00 '#*900 0 0 ,01000 ,*4000 *:'440 *##040 0 0 *:9<:0 *:4400 0 0 ',:#04 ',4,:4 0 0 ',94': ',<#40 0 0 9)-5) 9)88-) 11* *1* 1)495) 1)*4-) (8* 1**
ased on the above data, the lowest bid price is by employing ! shifts"
C%&!;&%te Bi' Cost ;sin< Cr%she' Costin<
2.
$n order to optimize the costs and identif! the right bid price another alternative solution is to use =rashed =osting. 24 Shifts
A!ti"it#
Ch%n
Ch%n
Cost R%te
A
:
'#000
,#00.00
B
0
0
0.00
C
*:
'<#00
41:.''
$
'#0
440000
,9**.**
E
'#0
'4<#00
91*.**
F
,#
,#000
'000.00
0
,#
*#000
'400.00
H
,#
'0000
400.00
3
*#
',#00
*#<.'4
K
*0
',#00
4':.:<
L
,
4#000
,,#00.00
M
,
',#00
:,#0.00
;ased on the data above we saw that Activit! ; cannot be further crashed so we shall use the data with Ene Fhift for Activit! Activit! ;. The rest of the activities were reduced reduced further in terms of cost and duration b! crashing.
429 Shifts A!ti"it#
Ch%n
Ch%n
Cost R%te
A
,
'#000
<#00.00
B
0
0
0.00
C
',
'<#00
'4#1.**
$
#0
',#000
,#00.00
E
#0
4#000
900.00
F
1
,#000
*',#.00
0
1
*#000
4*<#.00
H
'0
'#000
'#00.00
3
'0
'0000
'000.00
K
'0
',#00
',#0.00
L
,
#000
,#00.00
M
'
',#00
',#00.00
/sing AE5 we shall identif! the dierent paths in completing the pro&ect7 "ath '7 A G ; G G B G D G 8 G M H 4#4 da!s "ath ,7 A G ; G = G B G D G 8 G M H ,09 da!s "ath *7 A G > G ? G 3 G C G 8 G M H 1-( '%#s
this is the !riti!%& /%th
#sing the critical path, we shall crash the lowest cost rate which from the table is $" We shall crash further and this will be depicted by the table below"
$;r%ti on 6'%#s7
Cr%sh
49<
none
4:,
C
*',
>
,1<
?B
,:,
3D
,#:
A
,4:
C again > again
'9:
'11 '<1
(8
?B again D3 again A for the &%st tie
$ire!t Cost :,4<#0 0 :,:000 0 :14<#0 0 :11,#0 0 :9*000 0 :94#00 0 :9##00 0 <',#00 0
In'ire!t Cost *4<900 0 *,:900 0 ,*:900 0 ,,'900 0 ,0:900 0 ,0**00 0 '9<100 0 ':<100 0
<':#00 0 <,',#0 0
':,,00 0 '##900 0
()44()5 **
)515)* **
0ener%& %n' A'in Costs *190:00 *1'':00 *:1::00 *:40:00 *#99:00 *#9',00 *#<*,00 *#,',00
Tot%& Cost '*:'<' 00 '**40: 00 ',90*' 00 ',<4,' 00 ',#91: 00 ',#:9, 00 ',#0:, 00 ',*,4, 00
*#01:00
',*0'1 00 ',,10' 00
9)5*-)** *
4)4,) 5**
*#'4100
On e Shi ft
Thr Two ee Shif Shif ts ts
Bi' Pri!e
49<
0
0
'49<11'0
4,<
*#
0
'4:<4::0
',<
'1#
0
'4'9*4'0
<<
,'0
0
'40':*'0
,<
,*#
0
'*1#14:0
'#
,4'
0
'*1,:',0
'#
,0:
,#
'*<#:1,0
'#
#:
',#
'*##::,0
'#
40
'**
'*#*'910
'#
'*
'#0
'*#01''0
5
-
54
9)5*-)85*
'11 '<1
(8
?B again D3 again A for the &%st tie
<':#00 0 <,',#0 0
':,,00 0 '##900 0
()44()5 **
)515)* **
*#01:00
',*0'1 00 ',,10' 00
9)5*-)** *
4)4,) 5**
*#'4100
'#
40
'**
'*#*'910
'#
'*
'#0
'*#01''0
5
-
54
9)5*-)85*
Con!&;sion %n' Re!oen'%tion: Re!oen'%tion:
After After careful deliberation we have decided to choose alternative two as our bid price given that we optimized our resources b! having '# da!s for ' shift 9 da!s for , shifts and '#, da!s for * shifts. 2e also considered the probabilit! of having a strike for ,: da!s @as depicted in the computations made. Although this is not the lowest bid price it is certainl! the shortest s hortest time to nish the pro&ect. There is a slight dierence between the pricing for '<1 da!s @lowest bid price at "hp '*#01''0 and our choice which is the '<: da!s @lowest number of da!s at "hp '*#09:#0. '*#09:#0. The dierence is &ust "hp '#40. Also in our selection we have also considered our prot. Eur total prot is a little bit higher b! "hp '40 @',,10'0 vs ',,1'#0. ',,1'#0. $n addition to this since the emplo!ees are hired from union pools there is a strong chance that the local cavators /nion will strike an!time and thus ma! seriousl! aect the pro&ect(s protabilit!.
Con!&;sion %n' Re!oen'%tion: Re!oen'%tion:
After After careful deliberation we have decided to choose alternative two as our bid price given that we optimized our resources b! having '# da!s for ' shift 9 da!s for , shifts and '#, da!s for * shifts. 2e also considered the probabilit! of having a strike for ,: da!s @as depicted in the computations made. Although this is not the lowest bid price it is certainl! the shortest s hortest time to nish the pro&ect. There is a slight dierence between the pricing for '<1 da!s @lowest bid price at "hp '*#01''0 and our choice which is the '<: da!s @lowest number of da!s at "hp '*#09:#0. '*#09:#0. The dierence is &ust "hp '#40. Also in our selection we have also considered our prot. Eur total prot is a little bit higher b! "hp '40 @',,10'0 vs ',,1'#0. ',,1'#0. $n addition to this since the emplo!ees are hired from union pools there is a strong chance that the local cavators /nion will strike an!time and thus ma! seriousl! aect the pro&ect(s protabilit!. ?or this reason we chose the shortest time to nish the pro&ect not onl! considering the lowest bid we can present but also taking importance of the emplo!ees( morale.
Con!&;sion %n' Re!oen'%tion: Re!oen'%tion:
After careful deliberation we have decided to choose alternative two as our bid price given that we optimized our resources b! having '# da!s for ' shift 9 da!s for , shifts and '#, da!s for * shifts. 2e also considered the probabilit! of having a strike for ,: da!s @as depicted in the computations made. Although this is not the lowest bid price it is certainl! the shortest time to nish the pro&ect. There is a slight dierence between the pricing for '<1 da!s @lowest bid price at "hp '*#01''0 and our choice which is the '<: da!s @lowest number of da!s da!s at "h "hp p '* '*# #09 09: :#0 #0. . The The die dierrence ence is &ust &ust "h "hp p '#4 '#40. 0. Also Also in our our selection we have also considered our prot. Eur total prot is a little bit higher b! "hp '40 @',,10'0 vs ',,1'#0. $n addition to this since the emplo!ees are hired from union pools there is a strong chance that the local cavators /nion will strike an!time and thus ma! seriousl! aect the pro&ect(s protabilit!. ?or this this reaso eason n we chos chose e the the sh shor orte test st time time to nis nish h the the pro& pro&ec ectt not not onl! onl! considering the lowest bid we can present but also taking importance of the emplo!ees( morale.
