Reference no: EM132523001

Problem Solving

Part -1

Project Costing and Cashflow, and Project Performance Control (EVA)

Problem 1

As senior engineer with a medium-sized construction-contracting organisation you are required to put together a tender for a sewer main extension construction project in Southport. Table details your proposed financial schedule with cumulative direct expenditure and income presented. From this process you determined that the total direct works cost (direct expenditure for labour, materials and other direct overhead costs) was $230,000 and the monthly indirect expenditure for the whole project was $4,000 (such as staff salaries, utility bills, vehicle cost etc), and the contract price should be $330,000. Assume incomes (revenues) were received at the end of each month. From the financial details provided in Table:

a) Determine monthly overdraft (OD).
b) Determine average overdraft, and maximum overdraft,
c) Mark up

Table Financial Expenditure and Income Report

Month	Cumulative Direct Expenditure ($)	Cumulative Income ($)
0	0	0
1	15000	0
2	43,000	22,500
3	67,000	36,000
4	83,000	62,500
5	104,000	89,000
6	130,000	122,000
7	156,000	146,000
8	188,000	170,000
9	210,000	205,000
10	230,000	265,000
11	230,000	293,000
12	230,000	330,000

Problem 2

After week 5 in the project, your project accountant provided you with the latest financial data for four construction packages you are managing (see Tables 1 to 3). Each of the four projects are pipelaying operations of the same time and cost magnitude and very similar site conditions i.e. 8 weeks scheduled time and $91,000 budgeted costs. However, each of these projects has a different site supervisor with different levels of experience and management ability.

Table 1 ACWP Financial Data

Actual Cost of Work Performed (ACWP) - Cumulative Spending (000's)
Project	Week Number
	0	1	2	3	4	5	6	7	8
A	0	1	3	3	4	40
B	0	2	5	5	19	50
C	0	2	5	5	16	50
D	0	3	12	12	20	60

Table 2 BCWS Financial Data

Budgeted Cost of Work Scheduled (BCWS) - Cumulative Spending (000's)
Project	Week Number
	0	1	2	3	4	5	6	7	8
A	0	3	7	13	28	50	73	84	91
B	0	3	7	13	28	50	73	84	91
C	0	3	7	13	28	50	73	84	91
D	0	3	7	13	28	50	73	84	91

Table 3 BCWP Financial Data

Budgeted Cost of Work Performed (BCWP) - Cumulative Spending (000's)
Project	Week Number
	0	1	2	3	4	5	6	7	8
A	0	1	3	9	20	40
B	0	2	5	5	23	40
C	0	2	4	4	22	60
D	0	3	10	10	39	60

From the above-mentioned projects financial information:

a) Draw cost curves for all the Projects? Include BCWS, BCWP and ACWP details and fully label the curves?

b) What are the Schedule Variance (SV) and Cost Variance (CV) for the four projects at week 5? Describe the status of each of the four projects A, B, C, and D detailed above?

c) In detail, describe what may have caused each of these situations in the four work packages? Explore advantages and disadvantages of each situation and outline some deeper management considerations that may have contributed.

Part 2 - Sample Questions

a) Identify key staff members that should be included in ISO 9000 accreditation in a construction organization. Describe five major benefits of the implementation of ISO 9000 which can bring to the employees within an organization.

b) Quality management evolved through four stages- what are the stages? Detail elements contributing to the cost of control and the cost of failure of control for a Quality Management System with a graphical explanation.

c) Discuss the differences between the Traditional Procurement System and the Design and Build System. Briefly describe the advantages, disadvantages and suitable project types of each system. Discuss with examples different contract strategies.

d) Explain clearly the factors affecting the selection of a contracting strategy by a client? Use an illustration to describe what is meant by ‘Prime cost Contract , Partnered Contract, Management Contract, BOOT, and Design build Contract and discuss their main advantages and disadvantages.

e) What are the critical success factors for achieving successful implementation of a Quality Management System (QMS)? Discuss some of the important benefits of ISO 9000.

f) Briefly describe the distinct operations (steps) that should be undertaken when estimating a tender. Briefly discuss the traditional contract operational sequence.

QUESTIONS

You are tendering for a demolition project of a hospital building in Surfers Paradise.

a) Briefly describe the required operations (steps) when estimating this tender. How would you break-down this estimate?

b) Identify five major risks which may be encountered in this project and suggest how you can minimize these risks.

c) Identify five environmental problems that may be encountered in this project and explain methods to deal with them.

QUESTION

The Queensland Government proposes to develop a high-speed train to link the Gold Coast and Brisbane. The Government would like the train to travel at speeds in the range of 150-225 km/hour. It is expected that the train will run express from the existing Coomera station to the South Bank station. The Government would like the elapsed time for travel between the Coomera and South Bank station to be approximately 30 minutes. Your company has been chosen as the consultants to prepare a feasibility report on the proposed fast-train network. Your report for the Queensland Government should address the following areas:

a) Project Appraisal: discuss issues associated with the project's feasibility.
b) Contract Strategy: discuss the advantages and disadvantages of a number of contract strategies suitable for a project of this kind. What contract strategy will you recommend and why? What contractual issues may evolve from this large project?
c) Finance Strategy: Detail a number of project finance options for the project and illustrate the advantages and disadvantages of each option. Describe your chosen finance option and discuss the funding arrangement clearly i.e. Government, private company, consortium, or a combination of these.
d) Risk Management Strategy: Detail the project's most sensitive risk factors, describe their level of impact on the immediate and long-term project performance and recommend strategies to reduce their impact.

QUESTION

After week 5 in the project your project accountant provided you with the latest financial data for the four construction packages you are managing (see Table 2). Each of the four projects are pipe laying operations of the same time and cost magnitude and very similar site conditions i.e. 8 weeks scheduled time and $99,000 budgeted costs. However, each of these projects has a different foreman with different levels of experience and management ability.

Table 2 Project Financial Data

Budgeted Cost of Work Scheduled (BCWS) - Cumulative Spending (000's)
Project	Week Number
	0	1	2	3	4	5	6	7	8
A	0	3	7	30	45	60	71	89	99
B	0	3	7	30	45	60	71	89	99
C	0	3	7	30	45	50	71	89	99
D	0	3	7	30	45	50	71	89	99
Budgeted Cost of Work Performed (BCWP) - Cumulative Spending (000's)
A	0	3	3	20	35	40
B	0	2	5	10	23	40
C	0	2	4	20	22	60
D	0	3	10	25	39	60
Actual Cost of Work Performed (ACWP) - Cumulative Spending (000's)
A	0	4	4	30	35	40
B	0	2	5	15	40	50
C	0	2	5	35	45	50
D	0	3	12	20	45	60

From the above-mentioned project's financial information:

a) Draw the cost curve for Project A? Include BCWS, BCWP and ACWP details and fully label the curve?

b) What are the Schedule Variance (SV) and Cost Variance (CV) for the four projects at week 5? Describe the status of each of the four projects A, B, C, and D detailed above?

c) In detail, describe what may have caused each of these situations in the four work packages? Explore the advantages and disadvantages of each situation and outline some deeper management considerations that may have contributed?

d) Identify the under performing projects and suggest some management strategies to regain control of the schedule and/or cost situation?

QUESTION

A simple project consists of 4 tasks as follows
Planned:
Task A $60 per hour, 40 hrs/wk takes 3 wks, Starting Activity
Task B $40 per hour, 70 hrs/wk takes 3 wks, successor of A
Task C $40 per hour, 40 hrs/wk takes 5 wks, successor of A
Task D $50 per hour, 40 hrs/wk takes 2 wks, successor of both B and C
Actual case:
Task A $60 per hour, 40 hrs/wk takes 3.5 wks,
Task B $40 per hour, 80 hrs/wk takes 3 wks,
Task C $60 per hour, 40 hrs/wk takes 4 wks,
Task D $40 per hour, 40 hrs/wk takes 2.5 wks,
Monitor the project performance wk by wk and estimate the critical ratio for the weeks 3, 5, 8, & 10 (hints: first develop the bar chart-then EV Analysis, find out BCWS, BCWP, and ACWP for each wk)

QUESTION
As senior engineer with a medium-sized construction-contracting organisation you are required to put together a tender for a sewer main extension construction project in Southport. Table details your proposed financial schedule with cumulative expenditure and income presented. From this process you determined that the total works cost was $150,000 and the contract price should be $190,000. Consider an Indirect cost 10% of the total Direct cost and needed to distributed uniformly throughout the project life. From the financial details provided in Table:

a) Develop the month wise cashflow table (you do not need to draw graphs) showing monthly over draft.

b) Detail the mark-up, average overdraft and maximum overdraft.

Table Financial Expenditure and Income Report

Month	Cumulative Direct Expenditure ($)	Cumulative Income ($)
0	0	0
1	15000	0
2	23,000	22,500
3	47,000	30,000
4	58,000	42,500
5	74,000	59,000
6	80,000	72,000
7	106,000	86,000
8	118,000	100,000
9	135,000	115,000
10	145,000	150,000
11	150,000	180,000
12	150,000	190,000

QUESTION

As graduate engineer with a small construction-contracting organisation you are required to put together a tender for a sewer main extension construction project in Southport. Figure 1 details your proposed financial schedule with cumulative expenditure and income presented. From this process you determined that the total works cost was $161,080 and the contract price should be $179,080. From the financial details provided in Figure 1:

c) Draw the cash flow diagram for this project?

d) On the developed cash flow diagram detail the mark-up, average overdraft and maximum overdraft?