Reference no: EM132261887

Paul graduated from college in June 1970 with a degree in industrial engineering. He accepted a job as a manufacturing engineer in the Manufacturing Division of Percy Company. His prime responsibility was performing estimates for the Manufacturing Division. Each estimate was then given to the appropriate project office for consideration. The estimation procedure history had shown the estimates to be valid. In 1975, Paul was promoted to project engineer. His prime responsibility was the coordination of all estimates for work to be completed by all of the divisions. For one full year Paul went by the book and did not do any estimating except for project office personnel manager. After all, he was now in the project management division, which contained job descriptions including such words as "coordinating and integrating."

In 1976, Paul was transferred to small program project management. This was a new organization designed to perform low-cost projects. The problem was that these projects could not withstand the expenses needed for formal divisional cost estimates. For five projects, Paul's estimates were "right on the money." But the sixth project incurred a cost overrun of $20,000 in the Manufacturing Division. In November 1977, a meeting was called to resolve the question of "Why did the overrun occur?" The attendees included the general manager, all division managers and directors, the project manager, and Paul. Paul now began to worry about what he should say in his defense.

QUESTION:

1. What do you think happened that caused the overrun?

2. What should Paul need to defend the estimates he provided?

3. What estimation method does Paul used in his estimates?