Reference no: EM133175899

Jack and Jill Smith have just retired and want to build a small, basic cabin in the Blue Mountains of Vermont. They have hired Daryl Hannah as the general contractor for the project. She has assembled a team of three workers to complete the project: Tom, Dick, and Harry. Daryl has negotiated a cost-plus contract with the Smiths whereby she will receive 15 percent beyond the cost of labor and materials.

Before they sign the contract the Smiths want an estimate of how much the project is likely to cost and how long it will take.

Daryl has estimated that the cost for materials, permits, etc., will total $40,000. She wants to determine labor costs as well as how long the project will take. This is one of several projects Daryl is managing, and other than occasionally helping out, her role is strictly limited to supervising. She has devised the following master plan and assignments.

Note that Dick is the only skilled plumber in the group, while Harry is the only skilled electrician. Tom is a general carpenter and can assist them with their work. Dick and Harry each get paid $300 a day, while Tom gets paid $200 per day.

Daryl has negotiated a 10 percent management reserve to deal with unexpected problems. Unused funds will be returned to the Smiths.

Prepare a short proposal for the Smiths that includes a Gantt chart with resources assigned and cost estimates if the project starts on 8/1/16. Did resource limitations affect the final schedule? If so, how?

What financial risks does this project face?

What can the Smiths do to protect themselves against those risks?