Sharon Construction Case Study

8,744 views

Published on

for project management course

Published in: Education, Business
0 Comments
8 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
8,744
On SlideShare
0
From Embeds
0
Number of Embeds
21
Actions
Shares
0
Downloads
359
Comments
0
Likes
8
Embeds 0
No embeds

No notes for slide
  • Expedite the pouring by paying extra $20,000 with 6 weeks deduction. Weather will not affect the activity I (pouring concrete)
  • It is pretty much the same as the proposal 1 except adding the “field & truck filling cost” with extra $10,000.
  • If there is no strike, let the cold weather happed without heating and delay 4 weeks, because there is no incentive to get it done earlier. It causes 4 weeks delay, so totally duration of the project is 52 which is still within 1 year.
  • Cut six weeks of the roof erection with additional cost of $9,000. Pouring concrete would be affect by bad weather, so the extra heating cast $500/ week MIGHT happen.Lets take proposal 3 for example. If there is no strike, just delay 4 weeks and wait for the bad weather over. The total duration is still beyond 52 weeks. If there is a strike, no matter 8 weeks or 12 weeks, this strike period overlap with the bad weather forecast. Therefore, there is no need to use heating when pouring concrete.
  • If there is no strike, let the cold weather happed without heating. It causes 4 weeks delay, so totally duration of the project is 52 which is still within 1 year.
  • Wait for the strike over and then expedite the remaining works by cutting no less than 1/3 of its duration with extra cost $3,000/week. Cold weather and strike occur at the same timeIf there is a strike, then heating is no longer needed at all.
  • Wait for the strike over and then expedite the remaining works by cutting no less than 1/3 of its duration with extra cost $3,000/week. Cold weather and strike occur at the same timeIf there is a strike, then heating is no longer needed at all.
  • Based on each scenario, we generate EMV (expected money value) for each case. For proposal 1, we got EMV=$24,650 by add up fixed cost and possible extra cost. $20,000 which is the fixed cost of expediting the pouring process and ($51,000-20,000)*0.15.
  • So based on the cost analysis EMV method, we recommend to choose Proposal 4 because it has the lowest EMV in both no heating and heating needed scenario. On the other hand, Proposal 1 would be The second choice. Not only because it has the second lowest EMV, but also smaller loss range compared to Proposal 4.
  • And we do the Time Analysis to satisfy the question 2 ” what other basis might be used to make a decision besides expected costs?” So we do the calculation of each possible duration.As I said before, for proposal 3,4 5, there is no incentive to get the project done earlier than 52 weeks, so there are two option open (either do heating or not ) when no strike scenario.
  • Based on the Time analysis, we recommend to choose proposal 1, for the shortest expected duration. Although Proposal 1& 2 have the same duration, proposal 1 is cheaper. On the other hand, proposal 4 would be the second choice if the cost-time ratio is considered.
  • What other factors might enter into the decision such as behavioral, organizational, and political? Behavioral-Is my company brand oriented? For example, we have a good reputation of always being on time, we want to keep this reputation. So we might under more time pressure and then pick up the shortest duration even it costs more. Sometimes, there are many like 3~5 project doing simotaneously. They might financially sacrifice this time pressure project to finished it earlier as possible and bring more capacity to do other project and earn more money to make it up. Also for the CEO attitude like he is a risk seeker or adverse? Organizational-Do the subcontractors, or material, machine suppliers have to capacity to work in an expedited scenario? Political- will governer get involved to labor dispute? Or maybe the government want to lower down the unemplyee rate, so they change policy, like we can hire non un worker.Financial- there is no information about the financial structure in this case study, such as how does the owner pay us, monthly or at the end of the project, how would our cash flow be?. Do we have enough liquidity to expedite the project? Do we have bonus if the project is done earlier?
  • Sharon Construction Case Study

    1. 1. Case Study (1)- SharonConstructionCorporationApril 16, 2013
    2. 2. Case situation• Project- 200,000 seat stadium• Start from Feb. 15, expected finish time: 1 year• Overhead cost of $500 per week for any delay after 52 weeks• Penalty of $15,000 per week of delay beyond next Feb. 15• Uncertainties: Strike and Weather in December (42th weeks).1.) Possible labor strike in Dec.:No Strike, P=50%;Strike:+8 weeks , P=35%; +12 weeks , P=15%2.) Possible heating need: 33% with extra heating cost $500per week, 67% with no heating need.
    3. 3. Five proposals• 1. Expedite the pouring of seat gallery supports with extra cost$20,000 and cut 6 weeks• 2. The same as proposal 1, but in addition, expediting filling ofthe field with extra cost $10,000 and cut 5 weeks• 3. Expedite the roofing with extra cost $9,000 and cut 6 weeks• 4. Do nothing until Dec. 1. If it is cold, delay the pouring orheating; If a strike occurs, expedite all activities after strikeover with extra cost $3000 per activity per week.• 5. Do nothing until Dec. 1.
    4. 4. Aclean siteBSubsurfacedrainageCField &TruckfillingDTurfinstallationEExcavationFPouringconcretefootingGPouringseatgallerysupportHPre castgalleriesIPouringconcrete seatsJInstallingsteelstructureKRooferectionLBuildingdressingroomMSeatpaintingFINISHNLightinstallationOScoreboard &facilitiesPrecedence Network88088816412161430124161630121228164820 20 282842411341 4542843245 483282854334832Critical Path: A E F G H I M
    5. 5. Aclean siteBSubsurfacedrainageCField &TruckfillingDTurfinstallationEExcavationFPouringconcretefootingGPouringseatgallerysupportHPre castgalleriesIPouringconcrete seatsJInstallingsteelstructureKRooferectionLBuildingdressingroomMSeatpaintingFINISHNLightinstallationOScoreboard &facilities8808881641216143012416163012622164820 20 282242+X351335 3942843239 42+X32828543342+X32Proposal 1 Possible strike occurs in 42th weekPossible strike occurs in 42th weekActual CostP(Strike) No heating(P=67%)Heating(P=33%)No strike, P=50% $20,000 $20,000Strike +8w, P=35% $20,000 $20,000Strike +12w, P=15% $51,000 $51,000$20,000[Expediting cost]+(42+12-52) x($15,000[Penalty]+$500[Overhead]) =$51,000
    6. 6. Aclean siteBSubsurfacedrainageCField &TruckfillingDTurfinstallationEExcavationFPouringconcretefootingGPouringseatgallerysupportHPre castgalleriesIPouringconcrete seatsJInstallingsteelstructureKRooferectionLBuildingdressingroomMSeatpaintingFINISHNLightinstallationOScoreboard &facilities880888164121692512416162512622164820 20 282237351335 3942843239 42+X32828543342+X32Proposal 2Possible strike occurs in 42th weekActual Cost$30,000[Expediting cost] +(42+12-52)x($15,000[Penalty]+$500[Overhead cost]) = $61,000P(Strike) No heating(P=67%)Heating(P=33%)No strike, P=50% $30,000 $30,000Strike +8w, P=35% $30,000 $30,000Strike +12w, P=15% $61,000 $61,000
    7. 7. Scenario of Proposal 3scenarioNo StrikeGood weatherno heatingneeded, done within 48weeksBad weather, delay 4weeks, no heatingneeded, done within 52weeks.Bad weather, heatingneeded, done within 48weeksStrike+8 weeks strike, noheating needed, donewithin 56 weeks+12 weeks strike, noheating needed, donewithin 60 weeks
    8. 8. Aclean siteBSubsurfacedrainageCField &TruckfillingDTurfinstallationEExcavationFPouringconcretefootingGPouringseatgallerysupportHPre castgalleriesIPouringconcrete seatsJInstallingsteelstructureKRooferectionLBuildingdressingroomMSeatpaintingFINISHNLightinstallationOScoreboard &facilities88088816412161430124161630121228164220 20 222842+X411341 45+X42243645+X 48+X32222542748+X26Proposal 3 Possible strike and cold weather occur in 42th weekPossible strike and cold weather occur in 42th weekActual CostP(Strike) No heating(P=67%)Heating(P=33%)No strike, P=50% $9,000 $11,000Strike +8w, P=35% $71,000 $71,000Strike +12w, P=15% $133,000 $133,000$9,000[Expediting cost] +(48+12-52) x($500[Overhead cost] + $15,000[Penalty]) =$133,000
    9. 9. Scenario of Proposal 4scenarioNo StrikeGood weather,no heatingneeded, done within 48weeksBad weather, delay 4weeks, no heatingneeded, done within 52weeksBad weather, heatingneeded, done within48 weeksStrike+8 weeks strike, Crash 4weeks, no heatingneeded, done within 52weeks+12 weeks strike, Crash4 weeks , no heatingneeded, done within 56weeks
    10. 10. Aclean siteBSubsurfacedrainageCField &TruckfillingDTurfinstallationEExcavationFPouringconcretefootingGPouringseatgallerysupportHPre castgalleriesIPouringconcrete seatsJInstallingsteelstructureKRooferectionLBuildingdressingroomMSeatpaintingFINISHNLightinstallationOScoreboard &facilities88088816412161430124161630121228164820 20 282842+8411341 49+24-2=22843251 51+13-2=1282854335232Proposal 4 Possible strike and cold weather occur in 42th weekPossible strike and cold weather occur in 42th weekActual CostP(Strike) No heating(P=67%)Heating(P=33%)No strike, P=50% $0 $2,000Strike +8w, P=35% $12,000 $12,000Strike +12w, P=15% $74,000 $74,00042+1253+255 55+156$3,000[crash cost]x4 +(56-52) x ($500[Overheadcost] + $15,000[Penalty]) = $74,000$3,000[ Expediting cost] x 4 weeks= $12,000
    11. 11. Scenario of Proposal 5scenarioNo StrikeGood weather,no heatingneeded, done within 48weeksBad weather, delay 4weeks, no heatingneeded, done within 52weeksBad weather, heatingneeded, done within 48weeksStrike+8 weeks strike,no heatingneeded, done within 56weeks+12 weeks strike,no heatingneeded, done within 60weeks
    12. 12. Aclean siteBSubsurfacedrainageCField &TruckfillingDTurfinstallationEExcavationFPouringconcretefootingGPouringseatgallerysupportHPre castgalleriesIPouringconcrete seatsJInstallingsteelstructureKRooferectionLBuildingdressingroomMSeatpaintingFINISHNLightinstallationOScoreboard &facilities88088816412161430124161630121228164820 20 282842+X411341+X 45+X42843245+X 48+X32828543348+X32Proposal 5 Possible strike and cold weather occur in 42th weekPossible strike and cold weather occur in 42th weekActual CostP(Strike) No heating(P=67%)Heating(P=33%)No strike, P=50% $0 $2,000Strike +8w, P=35% $62,000 $62,000Strike +12w, P=15% $124,000 $124,000(48+8-52)x ($500[Overheadcost]+$15,000[Penalty])= $62,000
    13. 13. Cost AnalysisNo heating Scenario (67%)Heating needed Scenario (33%)Probability Strike Proposal1Proposal2Proposal3Proposal4Proposal5No Strike- 50% $20,000 $30,000 $9,000 $0 $0+8 weeks- 35% $20,000 $30,000 $71,000 $12,000 $62,000+12 weeks- 15% $51,000 $61,000 $133,000 $74,000 $124,000EMV $24,650 $34,650 $49,300 $15,300 $40,300Probability Strike Proposal1Proposal2Proposal3Proposal4Proposal5No Strike- 50% $20,000 $30,000 $11,000 $2000 $2000+8 weeks- 35% $20,000 $30,000 $71,000 $12,000 $62,000+12 weeks- 15% $51,000 $61,000 $133,000 $74,000 $124,000EMV $24,650 $34,650 $49,330 $15, 630 $40, 630
    14. 14. RecommendationbasedonCostAnalysis-EMVmethod• Choose proposal 4• Proposal 1 would be the second choiceReason• Proposal 4 has the lowest EMV, and it can end up with noextra cost.• Proposal 1 would be the second choice because it hassecond lowest EMV and is better than 2, 3 and 5 if astrike happens.• If the CEO is adverse to risk, then select proposal 1which has smaller loss range (from $20,000 to $ 51,000)
    15. 15. Time AnalysisProbability Strike Proposal1Proposal2Proposal3Proposal4Proposal5No Strike- 50% 42 42 48 48 48+8 weeks- 35% 50 50 56 52 56+12 weeks- 15% 54 54 60 56 60Make span 46.6 46.6 52.6 50.6 52.6
    16. 16. RecommendationbasedonTimeAnalysis• Take proposal 1• Proposal 4 would be the second choiceReason• Proposal 1 & 2 has the shortest average duration, butproposal 2 costs more.• Proposal 4 would be the second choice because it hassecond shortest average duration and is better thanproposal 1 if the cost-time ratio is considered.• If the CEO cares time the most, then select proposal 1.
    17. 17. Other factors• Behavioral – Employee morale and enthusiasm if a strikeoccurs. Is this company brand oriented?• Organizational – Will a strike and falling behind schedule leadto layoffs or low morale? Does the sub-contractor have thecapacity to work in an expedited scenario?• Political- Will local or state government become involved in alabor dispute• Financial- how urgently does the firm need cash flow? Willearly completion lead to financial benefits?• Cultural – If labor force is mostly of the samebackground, they may be more culturally or less culturallylikely to strike.
    18. 18. Decision making as thepresident• I will choose proposal 4.• The first reason is obvious that it has the lowest EMV. I am arisk seeker so I do not think the broader loss rang would be abig problem.• Although proposal 4 has longer duration than proposal 1based on Time Analysis. Besides, there is no extra bonus if weget it done earlier. For financial reason, I will choose proposal4 for sure.

    ×